It's amazing how business seems to understand the free market when it's selling to customers, but can't seem figure out the free market when it comes to hiring labor.
They likely do understand, but are just waiting for the extra federal unemployment benefits to end. The smart choice (from an employer's standpoint) would be to make it past September 6th without significantly increasing wages, then evaluate. If they give workers a higher wage now and it turns out to be unnecessary once the extra unemployment ends, it'll be pretty much impossible to take that back without replacing the entire staff at once.
Business does understand the free market. It is also strongly incentivised to exhibit perpetual exponential growth. Perpetual exponential growth is impossible even on relatively short duration spans (decades), see the parable of the rice and chessboard. Business tries to maintain the illusion of perpetual exponential growth by making cuts everywhere it can: worker compensation and product quality.
Underrated comment. A lot of “growth” is tricks. I have seen so many software companies sacrifice the fundamental health of the product in order to hit certain “growth” numbers, on the assumption that they’ll just be able to keep doing it. But the more realistic outcome is either acquisition (pass the buck and reset the clock) or catastrophic failure.
* Strongarming new user account creation even though most new users will immediately bounce.
* Removing features from the free tier to "drive conversions" to premium, whilst ruining the quality of the free tier that drew users in the first place.
* Filling the product with re-engagement nagware and notification bloat.
To be fair although, the entire existence of a free tier is to draw in people to premium, usually funded by VCs demanding an exponential growth curve. If they were bootstrapped, the free tier is pretty much non-existant in practice.
I think the vast majority of VC funded companies could make a profit if investors didn't demand exponential growth. Overfunding and shutting down companies is a choice they are willing to make. What our economy needs isn't the next billion dollar company. It needs lots of small companies to get away from corporate power.
It's actually quite strange how VCs are trying to basically create monopolies. They are trying to find the business equivalent of real estate.
Its called the invisible hand for a reason. People dont need to understand anything for the forces at play to balance things out, theres just some existing businesses as a casualty.
Or when they can't keep non-drug addicted employees who are willing to work for less than the cost of living. It boggles my mind the most when a lot of restaurants treat these employees like garbage and then get upset when they realize their worth and leave.
The issue is the temporary competition from government covid benefits. Businesses understand perfectly well, but it’s kind of pointless to compete with higher benefits for not working. In my state, benefits were $16/hour. So businesses have a hard time competing with that because jobs can’t compete much with unemployment benefits.
It would be interesting to see what the trade off is for how much money it would take. But rationally, I think, I’d rather get $16/hour and study and take online courses for a year than make $25 and work.
Studies of states that extended the unemployment benefits vs ones that didn’t seem to show that the benefits accounted for a fairly small portion of the difference in employment.
From skimming the study, it looks like the study only looks at the employment rate change in 5-6 weeks after benefits were dropped? That seems like way too short of a period to draw any conclusions. I suspect many had savings built up, and that they expected the benefits to come back, therefore they didn't immediately go out looking for a job.
Per his findings, at very best the early end to ui lead to 160,000 jobs in june+july this year (6% over states that retained ui). And that’s without adding any of the complicating factors like how most of those jobs may have just been taken from new entrants to the job market. I don’t think that’s enough to explain the overall ”labour shortage” trend.
Benefits in some states expired last year, while other states renewed them - which makes for a perfect set of comparative data. Them ending completely now is going to change the landscape but it’s near impossible to say anything about how it changes the landscape since there’s no replication
data seems to show that it had a very minimal impact. The “labour crisis” is probably better explained by covid deaths and/or people changing their lifestyles/spending to endure the pandemic
Government distorting the labor market by keeping businesses open which should have closed with PPP loans (grants) isn't a free market.
Do you not remember the signs saying 'support your local restaurants'? As if they are somehow entitled to money, but the people fired from those places do not.
It's surprising businesses haven't turned to automation.
At the very least, most of a restaurant's and a coffee shop's labor can be replaced with automated ordering, having the customer collect food themselves when it's ready, and using robots to prepare more of the food. they can do lattes with art all by themselves now.
A lot of these businesses just can't survive if they meet the wage demands of people who have benefitted from substantial stimulus over the last 2 years.
Automation would increase the quality of their service and reduce costs in the long run. I keep hearing about how much workers hate these jobs, so they should be happy to see them go away.
Edit: every example I gave above has been observed successfully in action. They just haven't been widely deployed enough to become a norm.
Other jobs that can be replaced:
- host -> seat yourself sign
- server -> pager, bus your table, ordering tablet (with just ordering, don't put ads and games like they did 5 years ago)
- barista -> robot/dispenser tech can manage several facilities simultaneously
- retail/grocery -> see what Amazon is doing
- cleaning/janitorial -> robots and more innovative cleaning apprpaches could save a lot more effort. Japan has self-cleaning public toilets.
Might this be happening already? It seems like ordering at the counter is becoming more popular compared to full service, even for somewhat upscale food. Also, food trucks are popular.
As a parent of small kids, I really appreciate being able to pay while ordering as opposed to waiting for the waiter ( hmmm… ) while the children get antsy.
Of course, Now that I think about it, I’ve never asked if I could just pay after ordering. The force of habit, huh!
I'm afraid I can't find the graph, but I saw something showing that food service revenue has fully rebounded since the pandemic while food service employment has not. That would imply that labor saving is already in effect. It would also be unsurprising that not every restaurant would handle it equally well.
All of the local restaurants have raised prices. I've overheard a few restaurant owners talking and it seems customers don't like even small price increases. They also indicate the price increases are necessary for supply costs even as they raise wages and can't fill positions.
A lot of restaurants are just cutting menus/services to be able to stay on top of demand. This strikes me as hugely economically inefficient, but whatever they don't have much choice in the matter.
People on HN like to say "just raise wages" but I don't think they like to consider what a world without affordable restaurants looks like. Maybe that is the way to go, but there should be more acknowledgement that "pay every cook like a software engineer" means there will be far fewer restaurants and far fewer people employed as cooks.
To me, if 50% of restaurants close tomorrow, fine.
There are people who dine out 3, 4, 5 times a week, who don't really know how to cook anything beyond microwaved meals... that's completely insane!
And I think that's kind of what all of this hysteria is about. Because yeah, if the price of a burrito went up by $2-3, those people would have to learn how to cook some basic meals for themselves.
Not so long ago, dining out -- having another human being cook & bring you your food -- was a luxury, reserved for special events. This is something completely different.
> There are people who dine out 3, 4, 5 times a week, who don't really know how to cook anything beyond microwaved meals... that's completely insane!
I am not sure we have to be judgemental about other people's cooking skills to decide that restaurant workers deserve better pay. Everyone has some expertise, and some people choose to not learn how to cook, and that is ok.
My point is that the state of not even knowing how to cook and expecting to eat cheaply at a restaurant every night -- at every point in history besides the last 20 years or so that notion would be absurd.
I do feel that I can judge people for that, because other people work like dogs to cook their meals for them at below poverty wages. I'm judging, and I'm also raising the point that the current state of affairs is the absurd one. Not a possible future state of affairs where restaurants are again a luxury and people have to cook meals at home.
Reminds me of that Google employee that was complaining how during the pandemic, Starbucks was too far away from his apartment he was now forced to work from.
This guy, in his thirties and likely a brilliant engineer, just had no idea how to make himself anything, nor would he have the equipment or supplies for it. A total man-child, spoiled through and through.
I'm from Europe, and once visited Texas. I was shocked by how absurdly cheap it is to eat out. And not just the low prices, also the abundance of restaurants. We were on a highway and saw a sign "next 3 exits: food exits".
What!?
We tried a low tier option, a pizza joint. Upon entering, you pay 3$. Then it's all you can eat, as you walk past pizza slices having any topping you'd like, and you can just keep loading up. At the end, there's a soda machine with unlimited refills. And the pizza was actually pretty good.
I still just can't believe it. Does not compute. I'm not talking "thin margins", I'm talking...how the hell is this even remotely possible at all? In property, actual food cost, staff, taxes, the like? This would be 5-10 times more expensive where I live. A single glass of soda would cost more, and you'd get no refills.
At such absurd prices, I can totally imagine the culture developing where nobody cooks anymore.
The thing that might happen is that restaurants become unrecognizable. For instance if it all turns into dark kitchens on delivery sites. (Dark kitchen: restaurant without a traditional storefront that sells exclusively through a portal like Deliveroo).
Some of my favorite dine-in restaurants are still pickup only. I think they realized that they can make just as much money doing take out and a lot less people management now that there are no severs
The problem with this is, if the barista gets automated, the customers buy better coffee machines and stop going to the cafe.
An exaggeration, but you see my point perhaps. Unless your service is really purely about bang for buck, trying to automate it in ways that are visible to the customer can have downsides. McDonald’s could probably go full robotic. Starbucks? Not sure, maybe. It would be a little offputting. Your local (good) pizza place? Not likely.
This is not my experience. Watching Starbucks and my other local coffee places implement app/cashier less ordering it seems like more customers and more purchases.
Ordering on my phone while I’m the way is easier than talking with a human. And easier to add stuff on.
I’ve never considered buying an espresso machine and bypassing my local coffee place.
Similarly, I wish all fast food went cashierless. The cashier is the slowest and most error prone part of the process.
I had a daily Starbucks habit before the pandemic. During the pandemic I just made pourover coffee at home with some half & half, and even now, eighteen months later and I'm doing more out in the world again, I only get Starbucks about once or twice a month.
It's not like it's hard to make okay coffee, it was mainly part of me being out and about.
I don't see your point at all - most people that I know including myself who go to a coffee shop go to be able to sit down and relax for a few hours and enjoy the atmosphere/ambience provided by the physical environment and other customers in proximity.
Depends. I don't go to a coffee place to hang out with the Barista. I go to hang out. may be with friends/family. I couldn't care who made my coffee and how as long as it is good. I love automation as much as possible.
> most of a restaurant's and a coffee shop's labor can be replaced with automated ordering, having the customer collect food themselves when it's ready...
Which means "extracting free work from the customers", which is basically Marxism 101, "how to extract value from live work". My answer in such a place is to go straight out. I NEVER use the "automatic cashes", thank you very much.
> ... using robots to prepare more of the food. they can do lattes with art all by themselves now.
Robots are a sham, they're just a scarecrow to force workers into obedience. You'll replace more easily a lawyer with a robot than a toilet cleaner or a cook. Robots are fragile and horribly expensive. Good luck with that.
Just friggin' pay the people decent wages, for chrissake.
Robots are better at menial, repetitive tasks. No matter what you pay a cashier, they will never be better than an ATM.
Free humans to do menial work. I think it’s pointless to try to improve wages for these low end jobs.
Similarly with fruit picking. It pays poorly and is hard and dangerous. The solution isn’t to improve wages, but to automate. Humans shouldn’t be forced to do meaningless jobs.
According to the parent commenter Marxism 101 is to treat humans like pitiful cogs that need to do the same shit work over and over and over. I’m a leftist but I think peoples quality of living is much more than a good wage. Automating certain shitty jobs can free up spend for giving other more fulfilling jobs a better wage.
I think the solution to that is to just put robots in place of “pitiful cogs.” I think it’s quite depressing to keep humans in pointless roles.
I was once a security guard and it’s terrible work. So boring. The pay was crap. Of course, I would have liked more pay. But I was much happier getting a different, better job, than even doubling my pay.
So you never order anything from e-commerce websites because you have to enter your own order and payment information manually? Sounds like a stupid way to interpret Marxism.
> At the very least, most of a restaurant's and a coffee shop's labor can be replaced with automated ordering, having the customer collect food themselves when it's ready
Automation, automation, digital transformation, sure we can do it all. But in many cases it makes things suck a bit more, and life crappier overall.
If I go to a restaurant a real person taking the order is part of the ambiance and expected service. You pay for it (maybe not in USA though).
At the last place I visited some guy dropped a tablet on the table. It said 'Next-gen Restaurant Experience' at the back. We got to fiddle a long time to type our 6-person order in. Crappy. Last time I visit there.
> retail/grocery -> see what Amazon is doing
They facilitate rat-race shopping. No more small social chat at the PoS with employees that know you. Just in and out, and back to work.
We this kind of automation every time we lose small social interactions that are important in a healthy society, imho.
I think it really is highly dependent on the individual. For your example with restaurants I have the absolute opposite preference. When I go to a restaurant I'm usually dining with friends so the social aspect is already covered - I don't want/need to make small chat with a waiter.
Would be completely happy with an automated process there, for my mind that means more of my tip might go to the cook who is actually preparing my food in the first place.
With the waiter it is more about someome friendly taking the order, giving some advice, noting down some special preferences. And before that everyone looking at their own menu card at ease (okay, having 6 tablets might be an improvement then).
>If I go to a restaurant a real person taking the order is part of the ambiance and expected service. You pay for it (maybe not in USA though).
>At the last place I visited some guy dropped a tablet on the table. It said 'Next-gen Restaurant Experience' at the back. We got to fiddle a long time to type our 6-person order in. Crappy. Last time I visit there.
I'm definitely okay with fiddling with a tablet if it meant I didn't have to pay a 15% tip.
>They facilitate rat-race shopping. No more small social chat at the PoS with employees that know you. Just in and out, and back to work.
The amount of "small social chat at the PoS with employees that know you" I see happening (ie. when waiting in line) is approximately zero. In that case, the loss is zero.
The real future of this is everyone using an app on their phone that they are familiar with, like uber eats or doordash, with a few loaner tablets.
Although in the end the waiter might be necessary from a customer support and questions perspective tbh. I did an ordering app thing in a restaurant and we still talked to the 'bus boy' to ask questions in the end.
You could also make a reservation and submit your order from your phone and pay for it before you leave. Then you can show up at the estimated time, sit down, and immediately start enjoying your meal! No more waiting for the host to seat you, then waiting for the waiter to bring you water, then waiting for the waiter to take your drink order, then waiting for the waiter to take your food order, then waiting for all the food, then finally waiting to get the bill, waiting for the waiter to pick up your credit card, and waiting for the waiter to come back with your card.
There is so much inefficiency about your typical restaurant visit just begging to be optimized out. Restaurants win, too, because they can accommodate more customers per hour.
I tend to just not go to sit-down restaurants because they always manage to turn a 30 minute eating session into a 90 minute wait-fest.
95% of the time, I prefer eating at restaurants with no waiter and where you pay up front for the food. So much time and money wasted on talking to someone for something that would take me 10 seconds to do.
Waited service is okay for special dates and business meals or something.
You're greatly overestimating the reliability of such technology and greatly underestimating the costs of it. There's a reason automation has not replaced these roles, it's simply not (yet) capable or cost effective. Source: I worked for a startup that built restaurant automation solutions and witnessed first-hand how difficult this is. It'll get there some day, but we're a long ways off.
You must want to live in a frigid world bereft of human connection.
I recently went to a place that had no welcome/front end staff, just workers making a product (desserts) and a two kiosks at the front to take your order.
The kiosks interface was poorly made and confusing for a first time person. Worse, there was no sign telling me to step forward and order using the computer nor was there any sort of line to know who had already ordered and who were waiting to order. Over all it was a terrible experience and as such I don't plan on going back.
Ordering automation is there with order-and-pickup apps like doordash and instacart, it's just they charge a fee that costs more than doing answering the phone typically, which is why restaurant owners tend not to like them.
Also those kind of seat yourself / serve yourself places exist, they're called fast food typically. Look at mcdonalds, chipotle or subway for example. That setup is actually very old, from the time before computers.
Places that serve alcohol like waiters although, because they are essentially alcohol salesmen that boost sales, and alcohol are big profit drivers for restaurants.
I'd stay at home if going to a restaurant was like you just described it. Also, you, and many people, seem to forget that the role of the economy is to provide for the people, not the other way. If you automate everything without providing viable solutions you're just pushing people to shitier jobs over and over.
If going to a coffee shop meant going to some sort of self service machine, pushing a few button and getting a machine made Nespresso pod coffee I'd just stay at home and save the money....
What's the end goal of all this ? Automate everything, skip all human interactions, destroy every small restaurants/coffee shops ?
This "automate everything" attitude is so weird, almost like some people want to dehumanise humanity. You know what would be the absolute automation, providing the best experience for everyone, for the least amount of energy spent ? Being in a coma in some form of pod, fed artificial thoughts and food/oxygen through tubes.
Automation only make sense if it delivers us from work, not if it pushes people into worse positions.
The economy doesn’t exist to serve “the people” (referring to a specific class), it exists to serve “people.” That number of people being served can very well grow or shrink over time. The existence of automation doesn’t guarantee it is strictly decreasing; consider the automobile industry for example, which created millions of jobs.
As far as humanity is concerned, perhaps it is uniquely human to bitch about low paid service jobs (even when they aren't all that low pay) while also bitching about those jobs no longer being necessary. If the labor I interacted with regularly took their jobs seriously and had good customer service skills, I wouldn't be so quick to cut them out of the picture. Unfortunately my experience is that at least in the US, the culture of work varies wildly by region, and most of them aren't all that good for the consumer.
Speaking purely about food service roles, as I recall, the minimum wage for tipped food services roles in some places is 2.13 USD per hour, made up to actual minimum wage if tipping doesn't reach that level.
Labour costs are, in many cases, really small; the capital and running costs of automation could well be comparable already.
The economy has undergone a massive and fundamental shift because of the pandemic. It is disingenuous, at best, to say the increased unemployment insurance is “the only thing that’s actually changed.” Everything has changed. The demand for in-person services. Transportation and how (and even how often) we travel. Childcare. Education. Entertainment. Everything.
Ok. But people still need money. The people who were working fast food jobs a couple years ago and are now choosing not to work… how are they paying rent and eating?
Government handouts are the one thing that has changed for those folks.
Forgiven loans are surely also a handout, although… the whole point of how the forgiveness was structured was to prevent people from firing or laying off their workers. So I think your comment is based on a false premise.
Not even close when people were opening businesses just to get them, or fluffing theur payroll to get the max. They also just had to use X% for payroll, didn't say how much to whom, so you can just imagine how that panned out.
Incidentally you can look up what businesses have taken in loans.[1]
edit to add- a lot of business owners including my own father took the max possible even though he didn't need it one bit, as not doing so was 'leaving money on the table'
Is this a reference to the PPP loans? I know a lot of small (and large) businesses received lots of cash injections but I don’t see how business owners having more money leads to fewer hires?
The last year has been very different, that causes an actual change in people. We can't attach numbers to it though, so it gets less attention.
There has always been a balance between monitary compensation and other compensation, like being treated well, or having fewer work hours, etc. Everyone weighs these differently, but a small shift in the average weights can have a large impact. Perhaps on average people are valuing good working conditions more. Or have decided they'd rather do without some luxuries in exchange for avoiding certain types of jobs.
If your company has trouble hiring, it's a signal that something is wrong with the hiring process and the company needs to change it. Maybe stop leetcode nonsense, maybe offer more equity. Your managers should spend time to figure out the root cause and fix the problem. If your management cannot figure it out, fire them first.
If your company has trouble retaining engineers, it's a signal that something is wrong with the work environment. It could be pay. It could be lack of promotions. It could be a lack of recognition for the amount of work they are putting in. Once again, it is the management's job to figure out the root cause and fix it. If they can't, fire your management first. Hire/promote people who can do something different.
It is quite clear that in a hot economy, a lot of employers will need to reevaluate if they have the right decision makers in the first place.
If there are a lot of interviewers like that FB guy on teamblind who just searches for the hardest question and fails everyone for the tiniest error because he's fed up with the interview process, then yeah, there are problems.
It’s been fun to see this play out at my current (self-destructing) company. A large percentage of senior engineers have left; rather than make changes, management is going about business as usual.
After doing absolutely anything and everything possible for the past 18 months to create a dysfunctional economy, it is laughable to contribute the current five-alarm fire in the US labor market to bad pay and shifting worker expectations.
I hate to be the bearer of bad news, but all of those problems could be alleviated by gasp paying workers a living wage, with schedules that allow one to have a life outside of work.
What's laughable is the absolute privilege of treating the worker class like the slaves they are and demanding they take what is offered.
Coincidentally the income inequality is the highest ever as well- but of course that couldn't be part of the problem.
I want a news organisation to look at 10 jobs that cannot be filled and compare them to the broader market. As most of the unfillable jobs in my area seem to be manufacturing/outdoor labour that pay as much as retail (which seems a lot nicer) or jobs seeking experienced people at entry level pay.
Here in the UK we had supervisor/management positions trying it on for 0 hour contracts and minimum wage for months, although they seem to have gotten the message now they're having to literally shut their doors because they can't get staff. Worst one I saw was night manager of a massive central hotel for minimum wage. I wonder if it's that people have wisened up to the "take on extra responsibilities for no pay because it will look good on your CV" bullshit.
Bearing in mind it's only really the last generation or so in the UK who have gotten used to not expecting things like double pay for a night shift, workers expecting to be paid about £10p/h for a bar shift finishing at 4am still isn't a bad deal at all
> I wonder if it's that people have wisened up to the "take on extra responsibilities for no pay because it will look good on your CV" bullshit.
My hypothesis is that a bunch of people in low-paid service jobs like this had their jobs cut under them by the pandemic and were forced to find alternative income streams. That was painful at the time, but now many of those people find themselves in a much stronger position to refuse the work.
The biggest joke about those manufacturing jobs is a lot of HR will filter you out if you don't have experience. Meanwhile no school trains or teaches you about how to operate a CNC milling machine. Technical colleges offer apprenticeship programs if you can find a place that will sponsor you. But then that circles back to not being able to find a company without experience.
The blue collar labor market is just a magnificent joke. I tried it for about 7 years of my life and they will literally only employ you if they somehow know you or you know someone else. If you're just a stranger, they won't even look at your resume. They don't even want to train on shit that in the 1960-1990's, they would take you if you weren't a total moron and could pass a drug test (if that even).
Modern HR has become a joke in this situation as well. Not only do they pretend like they add value to a company, but they filter out people who could easily be exploited for cheap simply because they don't have experience. Seriously, just hire a rando who seems vetted, make them do some bitch work and occasionally the main job duties. If they catch on, give them more, if not, get rid of them. It's like employers have become more risk averse than someone investing in CD's...
Painfully obvious too. My little local Mexcian place will be closing down because of a lack of cooks. Talking to the owner, he was complaining about government benefits, and how they all want $20 an hour.
I don't understand it, that you'd either
a) be willing to drive your business into the ground serving a limited menu because you won't hire a couple cooks at $20 an hour, or
b) have a business so close to the brink of shutting down that an additional $20-50 an hour will shutter you.
Same with a bundle of Great Clips a friend manages for a franchisee. Can’t find staff, doesn’t believe staff are worth what the current effective minimum wage is.
“Have you tried offering more?” “That’s too much for cosmetology work.”
Getting slapped by the invisible hand of the market.
The small biz owners here described here aren’t the Masters-of-the-Universe “owner class” types. They don’t even really own businesses, they own lower management jobs.
Sure. And slave overseers are not plantation owners.
We have this bipartisan love affair with small business, and the fact is many of them are unproductive institutions abusing tons of poor immigrants to stay afloat. They also provide ideological cover for the more labor-intensive actual big corps. It's about time the rose-collard glasses came off.
That's fine, then. We shouldn't assume a certain service or job is productive enough to exist because it used to be in the past. If barbershops need to go the way of horse liveries, that's OK.
> We shouldn't assume a certain service or job is productive enough to exist because it used to be in the past. If barbershops need to go the way of horse liveries, that's OK
Automobiles replaced horses, did I miss the memo on something replacing hair growth?
did I miss the memo on something replacing hair growth
Men have been giving it a shot for a while, but unfortunately being half bald hasn't yet resulted in commensurate reductions in haircut prices compared to other men. It seems like there's a business opportunity there for a business model based on prices weighted by hair quantity.
There will always be a demand for grooming by experienced third-party groomers.
All we're seeing is a population struggling to accept their dollar is rather suddenly worth much less, there's a significant latency to such things sinking in. It can even be generational, some people never learn.
Case in point: When I bought some land in 2018 I paid the asking price, which I thought was perfectly reasonable vs. FMV. When some neighbors came by and welcomed me to the neighborhood, they asked what I paid. When I told them they were shocked and said I overpayed by a lot. This was in 2018, pre-pandemic prices, and the neighbors were an elderly couple who had once owned multiple properties on the block. Their perception of FMV was completely out of touch with reality, and just months later nearby properties similar to mine were selling for 20-50% more than I had paid, still pre-pandemic. Now that the pandemic has completely shocked everything from increasing demand for rural property accessible to city centers, to printing what, trillions of dollars? My place would sell for over double what I paid in 2018, and my elderly neighbors would still be believing it's worth less USD than I paid in 2018, if they were still alive.
> There will always be a demand for grooming by experienced third-party groomers.
Sure, just as is their demand for horses.
> All we're seeing is a population struggling to accept their dollar is rather suddenly worth much less, there's a significant latency to such things sinking in. It can even be generational, some people never learn.
https://twitter.com/JWMason1/status/1426245765437952010 it's far from universal across prices. The fact we where so much about prices and not about wages indicates a big bias in which these yeomen-presenting small businesses control the narrative.
I don't own a car, I don't pay for gas. I haven't noticed anything out of the ordinary, even with haircuts. If my haircut price did go up, and the barber's wage did too. I do not resent it.
> I don't own a car, I don't pay for gas. I haven't noticed anything out of the ordinary, even with haircuts. If my haircut price did go up, and the barber's wage did too. I do not resent it.
I've definitely noticed prices going up, but have been mostly dismissive of it as either being pathologically pandemic-caused and likely temporary (lumber prices for instance, I happened to be building a new roof throughout the pandemic) or opportunistic vendors not wanting to let a good crisis go to waste and gouging in the fog of the pandemic (a local organics market abruptly increased orange prices 300%/lb a few months ago, without even updating the displayed price).
And you can already find numerous news articles documenting cases of "shrinkflation" in staples like cereals [0], which is just a sneaky way of raising prices. I haven't personally noticed this since I don't consume such goods, but that doesn't mean it isn't happening.
My assumption is cost of services rendered by small businesses will be more variable and laggy in responding to the reality. Some will delay increasing prices, some will aggressively do so while the pandemic scapegoat is still fresh, some will just close their doors. When it comes to cases delaying price increases, they'll no doubt be exploring all avenues like cutting staff/hours/wages to eat the difference. The problem is, those cases dragging their feet on raising prices, their mentality likely reflects the mentality of their clientele/community. It's a collective of people operating in denial that shit's getting expensive, and yes, your $50 gets you a haircut, go ask for a raise, USD is inflationary.
> My assumption is cost of services rendered by small businesses will be more variable and laggy in responding to the reality.
Are you saying that you see the lack of correlation of the prices in the chart not as evidence inflation is over hyped, but as evidence of an inflation that is still working it's way through the supply chains?
Somehow people are going to need to get their hair cut, so this isn't going to be a horse liveries situation. More people may sacrifice quality or preference for a specific style & do it themselves. Some people might get shorter haircuts so they don't need one as often, maybe trim thing around the edges in between paid haircuts. Some people will be price elastic and pay higher prices.
The economics and behaviors may change, but the need won't go away.
In that case you'd be justified in not paying the tip, surely? The effective price beforehand was $45, since you weren't really tippin, just subsidising the employer.
They just bumped the price by 5 bucks and dispensed with the pricing trickery by paying proper wages.
Why? What would be different for the customer? The tip would just be rolled into the price of the service to amount to the same number, and quality of service would probably go down. Employees would also be taxed on the "tip" (which would now be included in their base salary). So what would really be the benefit?
And I'm not trying to be dismissive at all. Coming from Europe I also thought initially that tipping was really weird, but after living with it for a decade+ I got used to it and I'm really curious as to why we should stop doing it.
The experience and price would be consistent. I would know what I'm paying every time instead of trying to figure out what the extra 20% is or try to judge based off the items. Its much nicer going to restaurants out side of the country because you can just pay. There's no worrying about if I'm tipping right or enough or judging the service.
Also covid and those ipad paying terminals have turned every job into a tip job. Every cashier wants a tip now. And they ask you if you want to tip becasue no one can touch the terminals. Which is awkward to say no to. I see/hear people leaving ridiculous tips for take out. I had one terminal for take out not have a "no tip" option. I had to manually type in $0.
It undermines the norm that employees should be paid for their labor regardless of what the customer thinks --- that they can be fired of course but not underpaid for the labor already performed
It undermines the norm that businesses should pay their damn taxes.
To wit, we have been able to put off discussing the non-profitability of restaurants for far too long until now. Remember, it is quite arguable that Baumol's cost disease = "progress", not by definition, but by bi-implication.
> Employees would also be taxed on the "tip" (which would now be included in their base salary)
Tips are income already, and are taxed as such. You can get away with not reporting it if it's a few extra bucks from a jar on a counter. But if you're a "tipped employee" (and thus eligible to be paid sub-minimum wage) you report them to your employer, who then reports them to the IRS, and does tax withholding same as for wages.
That's a naive understanding of what's really happening at most restaurants. Cash tips are almost always significantly under-reported. It's nowhere near as low as "tip jar on the counter" amounts.
Yes, of course there is underreporting; nothing in my comment says otherwise.
I'm not following your point. Since some people cheat on their taxes, they shouldn't be paid wages instead, because then they wouldn't be able to underreport as easily?
My point was that the under-reporting is in much larger amounts than your claim that "You can get away with not reporting it if it's a few extra bucks from a jar on a counter."
> Since some people cheat on their taxes, they shouldn't be paid wages instead, because then they wouldn't be able to underreport as easily?
How did you get this from what I said? I said nothing to that effect. Not even close. My point was very simple.
Have you ever worked a job that depends on tips? Try serving a table of 20 and working your butt off and then getting no tip from the table because they "don't believe in tipping."
The correlation between "great service" and getting a good tip is nowhere near a 1:1. It sucks to go to work and not know whether you're going to come home with enough money to pay your bills this week, because you might get lucky or you might get a stream of tightwads.
I'd be OK with tipping if people made a baseline living wage and the tips were for service above and beyond the usual. I'm not OK with the current standard.
If you can't be persuaded that it's unfair to the workers, realize it's also unfair to you as a customer. Because people can't be reliably counted upon to tip their fair share, you need to over-tip if you care about people making a fair wage.
And the perception of a "fair" tip has gone up noticeably in my lifetime -- 10-15% used to be a reasonable tip when I was in my teens and early 20s. Now it's crept up to 15-20% and spread to a lot of jobs that you didn't think of for tips (e.g., somebody handing you a coffee) because wages suck.
> Now it's crept up to 15-20% and spread to a lot of jobs that you didn't think of for tips
...And, importantly, there's no way to actually know this because it's all informal.
I keep hearing that some places are now expecting 25% tips, while others are still repeating the older 15-20% figure. Some transportation workers (cab drivers, hotel courtesy van drivers) expect tips—others, in exactly the same job but a different company, don't expect them or even refuse them.
The informality of it all is one of the biggest reasons why tipping culture needs to die, and be replaced with actually paying workers a fair amount to start with.
I’ll counter with a question: do you tip when you buy a new laptop? At the grocery store when buying milk? If so, how much? If not, why not?
As a customer, I want to know the real costs ahead of time.
As an employee (last received tips some 30 years ago, but still…) I would like to get paid for the work I did, not that 50% of my pay would be contingent on how authentic I can make my fake smile look on a stressful day.
I usually tip 20% wherever I am because I am too lazy to figure out the local culture and because I can afford to; but I seriously hate it.
Visiting Germany 15 years ago was a bliss in this respect - the expectation was to round up to the nearest euro, if any tip at all. But I understand that now, at least in Berlin, 10%-20% tip has become the norm.
So you're saying the proper response for the employer acting to raise pay to the line workers by raising prices is for you, as a customer, to act to lower pay to the line workers by stopping the tips? That'd show the greedy owner!
Surely in some world that must make sense... but it's not our world.
I'm obviously not in the US, but this is a patently absurd perspective as it would then dictate that I am lowering pay to a lineworker by no longer being a customer. Where is the actual business's culpability in that twisted transaction?
I've just impoverished one barista at Starbucks because today I went to Cafe Nero instead! And I'm no longer a regular at my local Italian joint, so I've just deprived a few more people of an income.
For some reason you think this is about sticking it to the man but it's not. The staff get a stable, living wage and the business is charging prices much more in line with reality. I'm also no longer personally liable for the income of whoever served me, because the rightful responsibility for that lies on the employer.
> I am lowering pay to a lineworker by no longer being a customer
As an individual customer, not likely since line workers' pay does not directly depend on the number of customers served (at least until it's so low that the business goes under and they have to move to unemployment benefits instead). Tips depend on each customer though, so if you chose Starbucks over Cafe Nero, and Starbucks barristas don't get tips, but Cafe Nero's ones customarily do, then yes, your choice had influence on the income of Cafe Nero's barrista. Probably a small one, but it's there. If neither barrista gets tips (I've never seen anybody to tip a Starbucks barrista but in smaller shops it happens sometimes, though much less frequent than with waiters) then there's not much difference from a single individual action.
As a guy who gets a pretty standard, quick-and-easy cut, I get this. At the same time, $50 a month or whatever is pretty cheap compared to what I looked like after my partner tried her hand at cutting my hair at the start of the pandemic.
$50 or look like I've got the mange? I'll pay the $50!
There are plenty of barbershops in my area which charge $50 for a haircut but there are many more that charge $18. Having been to a selection of both the difference is mostly the level of interior decoration and not the quality of the haircut. The choice being between a $50 haircut and having your girlfriend do it at home is a false one.
I'd easily pay $50 for the convenience of having it done at home - easily worth it just for the time saved.
If your girlfriend can do it for you, that's worth a lot more than the money saved. So in my view once you have established that your girlfriend can do it, that is the better choice regardless of price.
this brings up something I've wondered about, why not start a gig barber app? you sign up and someone shows up at your house/work/wherever and cuts your hair
This kind of app has the problem that people would use it 1-3 times and then just directly call whoever they liked to make the next appointment, cutting the app out of the deal.
In the US, State occupational licensing laws for one. You can't cut someone else's hair without a license in most states. In my state you can't even dog/cat sit for someone for money unless you are going to their house because you need a kennel license to have them stay at your house if they aren't your pet.
That's the crux of it in a lot of cases. People have come to view a certain class of work as "not worth" paying a living wage. What's worse, the jobs they view as "not worth" a living wage are the ones that do the work we need (or at least really really want) done.
If all the cooks, servers, cosmetologists, janitors, lawn care / landscaping, delivery drivers, warehouse workers and so forth stopped doing their jobs... everything would suck real quickly. But somehow we're not willing to pay them a living wage.
> If all the cooks, servers, cosmetologists, janitors, lawn care / landscaping, delivery drivers, warehouse workers and so forth stopped doing their jobs... everything would suck real quickly.
That’s the idea behind a general strike I believe, but coordination is hard (and figuring out a set of demands that is effective long term may be harder).
/me once stayed in Athens during a garbage collectors’ strike; didn’t suck as much as you’d think, but was undeniably spectacular
> If all the cooks, servers, cosmetologists, janitors, lawn care / landscaping, delivery drivers, warehouse workers and so forth stopped doing their jobs... everything would suck real quickly.
I think you're mixing jobs together that really aren't of similar importance. If all the restaurants shut down, nothing much happens. People buy food at the super market for lunch and dinner. If all the landscaping crews stop working, you'll get more natural growth and some trees will at some point reach into the street / path and become annoying. If the cosmetologists go on strike, you get some annoyed women who need to fill their afternoon time with another activity.
If ware house workers, delivery drivers or garbage collectors strike, shit goes south pretty quickly. I've lived in a major Northern European city during a garbage collector strike, and it was silly to look at because it was pretty obvious who'd win when the trash bags started spilling into the road after people kept piling them up.
The government paying people to not work has nothing to do with this oft-misunderstood "invisible hand" metaphor.
I'm not sure why people think that a barber is somehow able to compete with the infinite resources of the government hellbent on idling labor capacity. Very few rational people will work for 25/hour if they can sit and watch TV for 20/hour. Saying "pay more" is not helpful in that situation. The labor pool is basically limited to those who have enough foresight to realize the gravy train might end.
Another way to put the same observation is that, given the choice, people will sacrifice a little bit of income in order to avoid working a crappy job.
If bread costs more than I would like, it's not a shortage of bread, it's just the bread being more expensive than I would like it to be. Exactly the same thing about labor. There are many people looking for a new job, and if you make it known that you pay more than they have now, some of them will run to you.
I have seen software companies making a similar mistake. Of course, the salaries there are way above the minimum wage, but still the same logic. They complain: "We wanted to start this new project, but we can't find developers; we have been posting job announcements online for five years already!" I look at the job announcement, it offers about 2/3 of the market salary. "Have you tried offering more?" Blank stares. I guess, how could that possibly be relevant?
Maybe the problem is that the employers see employees as "the ones who obey", which is generally true... except for the job interviews. There, you cannot simply give orders and expect them to be obeyed. The candidate will only take the offer if they like the proposed deal. Also, for the ones who accept, you can gradually make the deal worse, by increasing the workload and keeping salary the same regardless of inflation... until the surprising moment when the employee decides to walk away, because they got a better deal somewhere else.
It’s easy to understand. If your customers won’t buy Mexican food at a high enough price to pay $20/hour, it’s better to close than to stay open and lose money.
Labor is the highest cost for a restaurant (higher than rent) so bumping wages from $15 to $20 may not be possible if you can’t also raise prices by 30%.
This may be hard to understand for us rich programmers. But it’s quite simple for companies that have really stiff price competition.
The demand may just go elsewhere, like “screw it, I’ll just go to the supermarket”—not sure how plausible that is in a US context specifically, but surely there’s a possible world where the majority of people just stop eating Mexican or even most street food.
I’m sure a lower-quality segment will emerge once the whole thing has time to equilibrize :) And in some places the social aspect is not insignificant. (In others you’re better off without it, true.)
You dont need to increase prices by 30% to raise the hourly rate from $15 to $20. Pay is like a fixed cost. If your cook makes 100 items an hour and you profit 1$ off each item. Your profit for the hour only goes down by $5 not by 33 cents per item
But you also need to factor in the demand curve. Raising the price by 25% also means there will be less customers, which means your fixed costs (eg. rent, equipment) go up for each unit of good sold.
Maybe? Maybe not. I'm not certain that restaurant owners know to the penny what people will or won't pay for this or that on a menu. It depends a lot on how cost conscious the customers are and other factors.
Try bumping up the wages and advertising the fact that you do pay a living wage, that might have some impact. My fiance and I try to choose restaurants that are locally owned and are known to treat staff well. (We have friends in food service, locally. Word gets around.) I doubt we're unique in this.
It does depend a lot on location and other factors - you're going to find more people willing to spend more in some areas than others. Other people are perfectly happy to go to restaurant X knowing they fuck over workers but have the cheapest menu.
I think that most small restaurants tend to undervalue their food and service. Part of it is people's expectations, but even beyond that I believe they are so worried about going out of business that they try to run on the thinnest margins possible rather than raising prices by 50 cents and having some room for error.
There's also a lot of... this is how much it costs for me to make, so I should charge a little bit more. Where I think it should be... this is how much it would cost my customers to make in groceries and time.
When I eat out I almost only get food that is too inconvenient to make at home. I don't get spaghetti at the Italian restaurant, I get lasagna or stuffed shells or something that would take me hours of work at home. Yet, for a restaurant these are fairly easy items to cook because the time is less of a problem and are in many ways simpler for them to prepare because they are cooked ahead of time and reheated when ordered.
So for the restaurant, it makes sense to price a big plate of lasagna the same or lower than a plate of pasta they have to do more work on to serve. But to me the lasagna is worth more because it would take me at least 2-3 hours to make. So the restaurant sees it as a cheap thing while I see it as a valuable thing.
> There's also a lot of... this is how much it costs for me to make, so I should charge a little bit more. Where I think it should be... this is how much it would cost my customers to make in groceries and time.
Your competitors would love it if you set your prices like that.
Oh, no doubt. It's a difficult place to be, with no real margin for serious actual testing of what the price should be. It's too risky.
But I do think that they're subject to the pressure to under-price what they produce because to them it's easier. It's easy to discount your own labor when you think the job is easy.
Usually that perception of whether the job is easy is wrong.
In any case, I can't imagine a small restaurant having any way to seriously or accurately measure what their prices should be better than maybe a dollar. There's just not enough business to tell, and if you hit a bad region the place shuts down.
You can try setting it based off nearby businesses, but even then it's probably not better than a dollar of correct.
Every restaurant could raise every price on the menu by a dollar tomorrow and I wouldn't notice unless it was a soda or something. I'm highly skeptical a small increase in prices would drive people away. Like with minimum wage increases, every time it's allegedly going to be the end of small businesses in the area and then it never is.
I remember an old lady talking about the diner her daughter and son in law were going broke running. She came in and raised prices 10 cents here, 15 cents there, and buck there. And after a few months the books were a lot better.
You wouldn’t notice, but many millions of people would. This is pretty established economic theory of supply and demand curves. Are you arguing that increasing prices doesn’t decrease demand?
Why do you think companies don’t just raise prices by $1, since jimmaswell won’t even notice it or care?
I’ve never heard that increasing minimum wage will be the end of small business, I’ve just heard that it will be incrementally harder to put those wages and number of jobs at the low end of the wage increase will go down. (And that’s what happens) Again, that’s a supply and demand thing.
Are you arguing that prices don’t have an impact on purchases? Again, how do you explain companies just increasing prices arbitrarily? What do you think stops them from doing this?
Small price changes don't necessarily always impact purchases, as in the example of the diner the other poster gave. You also wouldn't pass up a gum stick if it was 57 cents instead of 56, and you wouldn't buy more if they were 10 cents. There was a term for this in my economics class but I don't remember, essentially elasticity of demand is not always a perfectly continuous function in reality. Somewhere like Wal Mart might have the price figured out perfectly by their team of researchers but probably not most non-chain restaurants.
We used to go to Red Robin at least once a month. It would cost us about $30-35 to feed all 3 of us before tip. We stopped going regularly and recently went back on a whim. Our bill was for $60 for 3 burgers and (non-alcoholic) drinks, still before tip. Nevermind that they were obviously running on a skeleton crew. I can go to a fancier place like cowfish/bad daddies for a better burger and better experience that actually costs less, or go "cheap" to five guys or culvers or freddies.
I'm not sure what their reasons are for raising their prices so much compared to 5-6 years ago, but it will probably be a long time before we go back, the prices are just too high compared to other options.
I'm with you, but others do notice. I know several people who will off-handedly comment on small increases in produce prices.
Likewise with items moving on/off the dollar menu at fast food places.
If there are 4 people in your family, that's an extra $4 at least, which is ~30 minutes of minimum wage, or about 1.25% of a week's pay before taxes. I'm not going to try to guess what portion of that hypothetical family's income is expendable, but if it's 1.25% of their total weekly earnings then it's probably a much higher percentage of their weekly disposable income.
If you've got $40 a week left over as disposable income, an extra $4 starts to seem like a lot more. In an economy where most people can't cover a surprise $200 bill, $4 means something to a lot of people.
It’s not just cooks, there are many other workers in a restaurant. I don’t think you raise prices 33%. But labor is about 40% of costs.
So a 33% change in labor increases prices quite a bit. And if everyone increases labor costs, then that drives up food and other materials.
So you will easily see price increases of 15-25%. If my local Mexican restaurant increases prices by that much, I and many other customers will not go as much.
This is super simple Econ101 stuff. Your example is flawed as there’s more than just cooks and there’s not a profit of $1/item.
My example was with simple numbers to illustrate a point that employee pay isn't directly tied to price of an item or the profit made. Also not every employee is paid the same. Maybe line cooks are getting a raise. Maybe the hostess doesn't expect one. Managers and what ever are already paid more.
> a National Restaurant Association publication that said the average restaurant runs about a 29.9 percent labor cost without taxes, benefits and insurance, and about 34 percent with taxes,
So your 40% number is way off. Also hourly rate doesn't effect other labor costs
McDonald's pays about 20% in labor costs, and from what I can see other restaurants also average 20-30%. Where are you getting that labor is the highest cost?
I think anyone who's not deep in accounting would assume we're just talking about the simple sum of all expenses, not specifically fixed or variable. Like if over a month I paid $100 in rent, $100 in payroll, and $100 in new equipment, labor was 33%.
> It’s easy to understand. If your customers won’t buy Mexican food at a high enough price to pay $20/hour, it’s better to close than to stay open and lose money.
I think the root problem is that most restaurant dining experiences are not worth the $30+ per person for enough people compared to cooking and eating at home.
I would like to see more places where you order at a register and bus your own food with minimal overheard and maximum investment in the quality of the food rather than the whole waiter and ambiance schtick.
This is what happens in countries with higher labour costs, and it's basically just fine -- provided your core cultural experience doesn't drive you to expect a separate staff person to fill your water cup every time you set it down of course.
Chipotle is pretty much the only "eating out" experience I've engaged in since the pandemic started.
Somehow they managed to not raise their prices, or raise it insignificantly enough to where I didn't notice it (50 cents across the board maybe?).
For sit-down places, I frequently see price hikes of 20-30% since early 2020 and mandatory gratuity for parties of 4 now, which is frankly ridiculous, because the food quality stayed the same or has gotten worse. Not to mention that the whole experience of sharing an indoor space with an unknown demographic is dubious at best.
> ...more places where you order at a register and bus your own food with minimal overheard and maximum investment in the quality of the food rather than the whole waiter and ambiance schtick.
This is currently a cultural non-starter except for niche markets, but once an economic crisis of sufficiently large and long duration is established, that model might work. Maybe. Look up any number of formerly-wealthy-now-poor nations, and I'm hard-pressed to recall any that adopted this model in the mainstream restaurant industry in that nation. Human culture changes are slow to arrive, and carry immense inertia.
I suspect the hyper-rationalization of markets is leading to continuous spectrum K-selection strategies that ultimately prove adverse to the overall market. All the monetization optimization (aided by the gradual incremental gains our industry delivers, however somnambulantly) is attaching a price to every factor that is priced, but under-pricing all non-priced factors (generally those on a long timeline like sustained incentives for young families to support future demographics, pollution, energy, etc.).
This optimization is blunted by currently-stronger cultural norms, especially those tangential or central to mating. It remains to be seen which force remains stronger over the long run (my personal bet is on the cultural norms).
Having said all that, I wouldn't mind at all patronizing a "meal plan" model-based co-op that lets me select 2-4 months in advance how many breakfast/lunch/dinner/brunch I want for a month, in a setting like you describe, a 1-3 minute walk from where I live, with online seating reservations, that operates 24x7x365, serving the locality's "home style" cuisine plus lots of greens. The business only lets in a dynamically-selected number of walk-ins, based upon seating availability and ML-projected food waste at that moment. The value proposition is trade off the customer-skin-in-the-game, fixed commitments for fresh ingredients freshly-prepared at near-home-prepared prices, with aggressively-amortized costs of running the co-op and its costs, thus able to pay fair wages for bare bones staff.
But I would be very surprised if there are enough potential customers like me in sufficient densities in even major metropolitan urban cores to make such a model feasible.
Most restaurants operate on very slim margins. That's why many smaller financial institutions do not risk commercial loans on them unless they've been established for a while or it's guaranteed by an SBA loan which heavily minimizes the financials risk.
Honestly I feel like most people would pay it. It seems to me that everybody just accepts you pay like 10x the price of what you could make something yourself as reasonable. I don't get it and it irks me that we even need to participate in this facade that we're all some sort of royalty class that are entitled this.
Something inexpensive that enables people to pay for not going to the effort to cook relatively tasty food exists everywhere that’s large enough to support the overhead, since before the modern times. It doesn’t have to be particularly good or healthy, but it does exist. In some European cities supermarkets just sell packaged premade salads and pasta, for example.
Personal service might be more expensive overall, but I’m not ready to immediately declare that obvious just because the people behind it are visible to the buyer.
The only way to avoid shutting down would be to raise prices, right? What if the owner knew customers wouldn't pay higher prices because he has tried to raise prices many times before and knows that it turns customers away?
The margins tend to already be razor thin. It is strange that they weren’t willing to try experimenting with higher wages and less employees. Maybe they’re already too overwhelmed from the pandemic to continue? The perception that not a lot of people are willing to pay for higher priced Chinese and Mexican foods factored into the decision?
I heard a hotel guy being interviewed on NPR afew weeks ago and he basically said raising wages was not an option because other places will just raise their wages too and it won't let them stand out. So he'd rather encourage tipping from customers.
Prices can be very, very sticky? In my city it appears (to my uninvolved eye) that several levels of floor space sublessors need to run out of lessees by raising prices in order to pay (possibly their debt to) the higher levels, with a couple months’ latency for each, until retail can reasonably exist again.
I doubt it’s that advanced, honestly, the commercial real estate market here is pretty thuggish.
And everybody’s prices are sticky, it’s seemingly part of how we define fairness. (See the haircut comment two levels up for an example from the consumer side.) I’m certain economists have loads and loads of strong words to say to all of us about this behaviour.
Inflation would look bad for politicians, but I doubt small business owners are ruining their business just so BLS can put out slightly better inflation numbers.
> b) have a business so close to the brink of shutting down that an additional $20-50 an hour will shutter you.
This is the default state of businesses in competitive markets. If you could do with less then you could charge less, and one of your competitors will start doing that to take your customers, so you have to do the same.
Of course, the alternative is to pay more and then raise prices. Which you might not be able to do if the additional cost is imposed only on you, but when your competitors have to pay it too, you all raise prices without losing business to each other.
But the overall industry would still lose some business to customers not being able to afford its products, and some of the suppliers still go out of business.
Unless the labor costs increase generally instead of only for that industry. Because then your customers can afford the higher prices. If labor becomes a higher percentage of operating costs overall, they may even be able to afford more than before. This is why a UBI is good for businesses -- customers have more money in their pockets.
This is a purely economic argument which if fine, but misses the vital non-economic side-effects. More money could lower the stress of the employees (given they now no longer have to worry about paying their bills) which may lead to higher quality products. Increased wages may attracts better talent or more exploitation conscious consumers. Hell, it may even more the owner more likely to listen to his staff, given that they become a significant expense. That could increase efficiency.
We should be careful not to make wage depression some sort of abstract "logical" natural state. Wages are low for a reason and active effort has to be expended to keep them as they are.
Cost reduction is not a "state", it's a process. And it is a natural process that will always occur. In any endeavor, humans will find ways to reduce the amount of inputs needed for outputs.
The problem is that it IS a purely economic problem. It's just math - supply, demand and competition. Small business in particular is captured by these forces. It cannot increase prices because people will go to the competition. And it has no margin to absorb people's desire to earn enough to live a middle-class life doing a job that you can hire anyone to do.
All of that said, what you could reasonably hope would happen is that all businesses raise their prices because of the labor shortage (already happening around me), but then you have another problem which is that the increased wages are offset by the increased prices.
At the current click, all that's going to be left are the corporations with enough wiggle room to absorb the increase, but they will also pass on prices. I would just prefer not to live in that world. I think corporations increase inequity (Walmart could pay a living wage and full health care, but doesn't) and small business puts the power back with the individual.
We ask, why don't workers go on general strikes? Well small businesses refusing to even try raising wages and prices amounts to a capital general strike.
Employers and employees simply have radically different market power, and that is as fundamental a fact in all economies remotely like ours as any econ 101 supply and demand.
Economics is the junction of mathematics and human behavior. I'm not going to travel half a mile to a different taco shop if the closest to me increases burrito prices $1-2 (in an area that reliably has at least 1 taco shop every half mile). In some sense, I'm a captive audience. I'm hungry and I don't want to walk an additional 15 minutes to save a few dollars.
People on HN tend to be way less price sensitive than average. People living paycheck-to-paycheck would totally walk an extra 0.5 mile to save $2 per meal.
My girlfriend will walk 30 minutes to save 50c on bananas. She is financially well now, but grew up without much, so those habits still stick. I would pay 5 dollars more to not move from my couch and get bananas on my doorstep.
The thing is, a lot more people are like my gf than me (I grew up middle-upper class and am 'financially' well upper class for my country).
> "More money could lower the stress of the employees (given they now no longer have to worry about paying their bills) which may lead to higher quality products."
Except businesses then raise their prices to cover the increased wages so the "more money" is almost instantly eaten away by having to pay those increased prices. You can't get something for nothing.
Or a lower quality products, because what you'd do if I slack off, fire me? No problem, I'll live off UBI for a while, then go to somebody who didn't fire me yet, there are a lot of places around.
> may attracts better talent
A lot of minimum-wage positions won't benefit from better talent - once minimal level of competency is reached, it's enough. Surely, a waiter could be a rockstar, probably - but most people, and most businesses, expect just not forgetting the orders, not dropping the food on the floor and not cursing out the customers, once it's there, there's not much monetary upside for the business from the better talent (of course, there are tips but that's different story).
> given that they become a significant expense.
Payrolls are already a very significant expense, especially in restaurant, etc. business. I don't think making them more expensive would change much.
Claims like this about UBI are simply unknown. You can't say it with any certainty, not even close. To begin to have UBI you'd have to increase taxes substantially, and you'd have to prove that doing that would actually lead to better results for businesses and the people.
> To begin to have UBI you'd have to increase taxes substantially
These would be far less of a burden than the implied taxes arising due to existing means-tested welfare. The incentive distorting effect from that sort of means-testing is extremely high, and the whole point of the UBI/NIT is to dispense with that.
You don't have to pay for UBI. You can just print more money. There are many things in between. Getting rid of reserve requirements and zero interest rates loans vs UBI can be viewed as points in a larger continuous space.
We know there are aggregate demand issues, and we now know that simply issuing more credit "the normal way" seems to cause asset bubbles before boosting demand for labor, so we should be open to trying other things even if we don't know exactly what will happen.
Or read Kaleki in 1943 https://delong.typepad.com/kalecki43.pdf, who predicted all of this (UBI resistance, direct gov investment resistance, The keynesian collapse in the 1970s, trying to boost employment by boosting private investment alone not working....). Incredible and saddening.
"It is
true that profits would be higher under a regime of full employment than
they are on the average under laissez-faire; and even the rise in wage rates
resulting from the stronger bargaining power of the workers is less likely to
reduce profits than to increase prices, and thus adversely affects only the
rentier interests. But 'discipline in the factories' and 'political stability' are
more appreciated than profits by business leaders."
That is is just plain corruption. Leaders (whether in governments or businesses) would rather have power for themselves than well-being for the country. Honestly, I had a hunch that developed nations didn't have less corruption, rather, the impact of corruption has been softened. Each individual industry leader might be corrupt but given enough competing industries their power diminishes. This is why government corruption is primarily associated with oil countries (or other resources) because controlling that single industry is the same as controlling the entire country.
You can clearly see it in Germany as well. Merkel and her party have close connections with specific industries commonly associated with Germany, the most prominent examples are car manufacturing because it is an export industry and the coal industry because Germany is resource poor (coal is all we have). If you work at VW CDU is the party you vote for...
It's selfish, but the funny thing is it probably isn't corruption by western definitions!
If you own a business and extract as much profits as possible --- not corruption. If you own a business and install your kid as middle manager to extract more money to your family -- corruption!
There's a quip that corruption is a term to penalize regions with larger extended families and kinship groups --- because the most galling corruption to the west is helping that 3rd cousin or clan member or whatever. But that is a real cop-out when in the west few know their 3rd cousin or are in a clan --- easy avoid nepotism when you don't know of the person!
The taxes thing confuses people mostly because they don't understand how existing phase outs work.
Right now the government pays benefits that are already close to what a UBI would pay, but in food/education/housing/other assistance. Then those benefits aggressively phase out.
The phase outs are crazy. First, they invert what you want from a progressive tax system, because lower income people are paying the highest marginal rates. You might be paying a "10% tax rate" but if you're also losing $0.50 of every dollar to benefits phase outs, your marginal rate in practice is 60%.
Worse, because the benefits phase outs are individual to every program, they overlap randomly to nonsensical effect. Someone making $20,000 might have a marginal rate of 80%, at $24,000 it's 110%, at $28,000 it's down to 40% but at $30,000 its back up to 60%. This is obviously very stupid and creates bad incentives.
Now suppose we align all the phase outs so that a) the phase out rate is uniform across all programs and b) we don't have lower income people paying higher marginal rates than higher income people.
Then you might have something this. Everyone pays a 10% tax rate from $0 to $60,000 and a 30% tax rate after, and benefits phase out at a rate of 20% from $0 to $60,000 and are fully phased out by $60,000.
Well, it turns out this is mathematically equivalent to paying the benefits to everyone unconditionally and having a flat 30% tax rate starting from $0. And if you convert all the benefits to cash instead of food vouchers and such then you have a UBI.
On paper eliminating the phase outs costs a ton of money -- everyone making $60,000 would have to pay $12,000 more in taxes! But then they all receive a $12,000 UBI and it just cancels out.
The primary transfer effect is really in not having such aggressive phase outs, i.e. not putting such high marginal rates on lower income people. The effect is that they have more money, and higher income people have to pay higher taxes to pay for it. But not by the full amount of the UBI, only by the difference between the status quo of aggressive phase outs and the less aggressive ones that make the marginal rate curve not so silly. You end up with a modest transfer from higher income people to lower income people, vs. the status quo.
And then, because lower income people are more likely to spend what they receive than higher income people, you get more consumer demand, which is good for businesses.
You also have a greater incentive to work for lower income people, because they get to keep 70% of what they earn instead of 40% (or -10%).
Lots of the nonsensical stuff is not exactly random.
Still the finances could be balanced like this and you could end up with an equal number of recipients receiving the same average benefit. Perhaps some efficiency through consolidation.
There is serious consensus that this amount has not been enough for a while which is one of the things that sparks the discussion about UBI more often.
Walmart & McDonalds might presently be employing the most noticable share of present recipients, but that is far from universal. Yet.
Just like with health care, to get anywhere near universal you're going to have to tax something having deeper pockets than mere income no matter how many of the top wage-earners get high brackets and have loopholes closed.
You're going to have to tax commerce.
If that could be done plus phase out the income levies, that would be the best thing for a consumer economy in over 100 years.
I have always hated the idea of UBI in any for it has been presented so far. Money means nothing if the price of everything shoots through the roof. Just yesterday I paid $9.50 for bacon where a year ago it was closer to $5. Let’s not even get started on shrinkflation of items. Back to my point though we don’t need a ubi but a right to food shelter and water. Anyone who has been poor knows something will eat up this check and you will be no better then before. It may not happen right away but there are too many predators looking for your money. I don’t know how you could give everyone the right to food, shelter and water but that is what we need.
UBI doesn't linear scale all incomes and wealths, so we shouldn't expect it to linearly scale all prices either.
The flip curse of the curse of high dimensionality is that adjusting interest rates or UBI has so wide and rich a space of possible effects, good or bad. We really need to try these things before jumping to conclusions.
The dirty open secret about development is that in highly developed countries with low inequality, human labor is just horrendously expensive, and since dining out has costs dominated by human labor, even relatively wealthy people dine out rarely.
Ask the Swiss or Danes. Cooks can have a living wage, but fancy meals are comparatively much more expensive than their equivalents in the US, given their lack access to underpaid immigrants for that kind of work.
Dining out is also a very localized industry, so this hits highly-productive areas within countries even more. Of course, the other side of the coin is that highly-productive areas are also constrained by real estate costs, regardless of prevailing wages. More rural areas don't have that factor, so people can afford to dine out more and still pay their cooks quite well.
Speaking of dirty secrets. There was a time not so long ago when there was not so much demand for dining out. Healthy food was generally prepared at home from fresh raw ingredients. Perhaps there was a small veggie garden in the back yard. There was plenty of time for shopping and cooking, and people didn't have to somehow squeeze these activities between the long commute back home from the second job and sleep time, while balancing an infant on their knees.
Thankfully we progressed out of those dark times and we are empowered today to enjoy the bounty of rice, factory farmed meat, salt and sugar slapped together by strangers on minimum wage.
> Healthy food was generally prepared at home from fresh raw ingredients. Perhaps there was a small veggie garden in the back yard.
Yup, that's called a subsistence economy. It's a very good thing that we can spend our time doing something better than back-breaking agricultural work and general housekeeping. That's what progress is all about.
It's perfectly possible to have good meals on the go, as evidenced by the fact that Italians, Spaniards, French and Peruvians can get simple lunch fares with high-quality ingredients and affordable prices, and it's not necessarily about home-cooked meals either.
> “To sum up, I may say that if the taste of our people [in France] for possessing land, and our habit of cultivation on a small scale, have singularly facilitated our progress towards equality, it is probable that the excess of opposing causes will drive the English in the same direction”
That the French (still) have access to good meals (not sure what you have in mind specifically) might have quite a bit to do with a history of small scale farming. That and a climate conducive to small scale farming. It remains to be seen how long this will last. The forces of globalization are rapidly eroding local culture everywhere around the world.
This is the only possible future and the best possible future. Progress is intrinsically a very good thing. The disappearance of the home-cooked meals can't possibly be anything but a great liberation. We have better things to do than feed healthy food to our children.
We have the results to show for it:
> In the 1960s and 1970s only 13 percent of U.S. adults and 5 to 7 percent of U.S. children were obese.
> The US obesity prevalence was 42.4% in 2017 – 2018.
> For children and adolescents aged 2-19 years in 2017-20181 the prevalence of obesity was 19.3%.
Sure, it "was prepared" - but by whom? For example, by the wife - for whom it would be a full-time job, together with another full-time job of raising the kids and another one of cleaning the house and maintaining it. Or, in richer homes, by a servant - who would often work for little more than home and food, and certainly wouldn't have such benefits as mandatory vacation, sick leave, pension fund, unemployment insurance and workers comp. You can argue a lot about which model is preferable - and people certainly do all the time - but you have to take the model in its entirety here. You can't have people working full time jobs and then have plenty of time for shopping and cooking things from scratch. We'd have to choose one or the other. And we'd have to choose having a backyard vegetable garden, feeding one person, or industrial farming, feeding 7 billions people. If you're rich enough, you can still afford the former - along with a servant to cook your healthy meals - but the whole 7 billions still can't.
Not to mention your competitors may be switching to robots, greatly reducing their labors to the point it might not be competitive if you're using humans and don't have the capital for the robot.
Where did I say that? But now that you brought it up... the problem isnt from competition, but from the paradigm shift that prevents low skill labor from supporting themselves (or trying). There is a lot of debate about how mass automation will affect macroeconomics and labor.
If everyone's wage goes up, the economy is probably running hotter and there is more growth. Don't forget the macro side if things!
A lot of well-credentialed people will say "bu- but the 1970s", but the fact of the matter is the wage share of income could also change, and rather than knee-capping unions to control inflation, we could have done price controls (as was done in the 1950s), profit controls (which would limit dividends and buy backs, not reinvestment to boost supply) or other such things.
But competitors are already in the same boat. Demand for business is high.
I really think that some of this is about class solidarity among business owners (especially small business owners). I say this as a political centrist, too.
There are a bunch of reasons why wages are "sticky" (i.e. they don't go up--or down--when you'd expect that to be the rational decision in an efficient market), and this is probably one of them.
Also, there are ways to seek out higher efficiency. Hire at higher wage but expect and prepare for higher productivity. Operate the business for longer hours to make the most of money paid for rent, etc. Unfortunately, I think small businesses where I live (in southeast Virginia) are much worse at this than larger businesses.
> This is why a UBI is good for businesses -- customers have more money in their pockets.
I'm a proponent of UBI and I think this claim needs a citation for the level of certainty that you expressed. I have always viewed that UBI will likely be bad for small businesses, but that by the time that we need UBI there won't be many small businesses left.
There are two pilots of UBI worth paying attention to: Finland and Ontario. Finland proposes paying the unemployed (this differs slightly from unemployment benefits in the US) while Ontario proposes paying anyone below the poverty line.
That said, it was not enough to impact small businesses in a positive way. Over 50% of small businesses reported having a large negative impact. There's lots of questions to be answered there, like the availability of non-extractive technology for small businesses to use to compete, and where the income levels where UBI-like income disbursements were centered actually spend their money.
> Estimates from the weekly U.S. Census Small Business Pulse Survey indicate that roughly 50% of businesses report having a large negative effect from the COVID‐19 pandemic and that only 15%–20% of businesses have enough cash on hand to cover 3 months of operations (Bohn, Mejia, & Lafortune, 2020; U.S. Census Bureau, 2020).
> Finland proposes paying the unemployed (this differs slightly from unemployment benefits in the US) while Ontario proposes paying anyone below the poverty line.
Neither of these is a UBI. Paying only people who are unemployed is in particular quite the opposite of what you want, because it discourages people from taking a job since they'll lose the money. Moreover, you need more of the middle class to be receiving some of the money (they'll pay some but not all of it back in taxes), because that's what increases consumer demand.
I do agree there are better implementations to be had, and that the implementation probably makes all the difference in outcomes. That said, I wouldn't say they're expressly not UBI.
Google claims under 9,000 results for quasi UBI. Some use it to highlight how actual UBI would be better. Some use it to describe programs like basic income for everyone in rural regions. Not expanded unemployment benefits.
It's also a good expression for something that doesn't perscriptively follow UBI but accomplishes the net effect or intended outcome. I'm willing to admit that there's more than one way to accomplish what UBI wants to accomplish.
But you're then using evidence from the not-UBI to claim that a UBI doesn't do something (benefit businesses), when the difference between the UBI and the not-UBI is that the not-UBI wouldn't be expected to do that thing.
Right, because that's the only evidence I have to draw from when UBI in the form you're referencing doesn't exist yet.
I also didn't say it can't, but I think the choice to make it optimal for SMB's, middle class, and upper middle class is an intentional one. I don't think that'll happen just by doing UBI. Hence I said, if you think it will then citation needed.
That's not what I'm doing and I don't appreciate you misrepresenting what I said like that, intentional or not.
UBI is purely theoretical. It does not exist anywhere on the planet in the form you're describing.
The US has engaged in UBI-like systems for quite a while, as have other countries.
UBI ascribes that everyone must get the benefit in order for the effects to be felt.
COVID incurred UBI-like payments, how these were used is worth studying, but they don't prove or disprove UBI. They certainly didn't improve the situation for small businesses, which is my point - if it takes a holistic UBI system to prove UBI and you're unwilling to figure out how to decompose it, then we'll never get it, and we're all doomed. That to me seems rather silly.
It is not a given that UBI will be a boon for businesses (big or small). Personally, I do think it will benefit large corporations, but it remains to be seen how small and medium businesses will fare -- and I think that largely depends on implementation details that need to be discovered. That much needs to be proven.
In order to prove some of the claims of UBI, countries are doing experiments and looking at specific effects that their implementations have in order to gauge UBI. Nobody is going to look a the monumental cost of UBI and fire a hope-driven-missile in terms of policy and economic risk, which is absolutely understandable. Finland and Ontario are putting out some tests, the inference they draw will largely depend on the questions they set out to answer. This is probably also informing them on how they could roll out UBI progressively.
What I was contesting was the absoluteness of this statement:
> This is why a UBI is good for businesses -- customers have more money in their pockets.
Nothing says that because people have money that they will spend it, much less where you want them to spend it. That has to be incentivized and we have to experiment with how to incentivize it.
It's a lot closer to UBI than existing systems. The Finnish case is an experiment where a random sample of unemployed folks can be paid for some time even after taking a job. It explores the impact of the very incentives you're talking anout.
(And yes, the lower-middle class will probably still be net UBI recipients if only barely, because this helps with smoothing out incentives at the lower end. You don't want to have a sudden benefit cliff, or else a breakeven point that's infeasibly high.)
If UBI is implemented we may be able to do away with minimum wage, at which point small businesses could possibly offer better (more interesting, less stressful) working conditions for less money, it’s possible people might go for that.
Right now companies must make $X per employee per hour. If their business cannot do that it’s deemed that it’s not productive enough and should not exist.
Agreed, that is a possible future, but it also depends on not raising taxes for already cash strapped SMB's and bankrolling those efforts with large corporations and high income earners who have lots of capital to fight those initiatives.
There are a lot of businesses on the brink. My regular Italian spot went out of business in the depths of the pandemic. They re-capitalized and opened again but with higher prices. Their clientele is upper middle class (i.e. relatively price insensitive). But they still wrote a long letter explaining why prices increased (more benefits, more salary) and asking that people support their increased overhead by becoming regular patrons. I think operators are really scared people will judge them on value if the price goes up.
Is it working for them? I get the feeling that it might, depending on the price level they were at previously. Perhaps the thing to do would have been to rebrand completely, make the place look a bit more fancy.
The place doesn’t seem quite as busy as before. But I’m not sure if that’s because of price changes or some general post-pandemic change (e.g. they also added outdoor dining, which might make the place feel less busy.)
It's one approach. A bit carrot-and-stick, but what I have seen in restaurants in upper class neighborhoods is chastising changes to public policy. Each menu page has a footnote mentioning there's a X% charge (that isn't the tip) applied to each menu item due to a rise in minimum wage.
Since they re-printed the menus anyways to add the footnote, they could have simply been more transparent and increased each menu item's cost. Most people regularly dining at fancy ocean-view restaurants (which I rarely frequent) can afford the higher cost.
The owner won't hire a couple of cooks at $20 an hour because he won't be able to pay off his mortgages anymore. The banker sits behind all this and collects his fat percentage cut while laughing at the plebs fighting with each other over scraps.
We have a 3 tier system: minimum wage workers condemned to a perpetual state of precarity, middle class professional and small business types that toil away paying hefty mortgages one medical emergency from bankruptcy and capital owners that lend around money at extortionate rates and run to the nanny state to print money and save their skin whenever their bets go sour. Guess which strata gets most of the flak. Tip: it's not those at the top.
> capital owners that lend around money at extortionate rates and run to the nanny state to print money and save their skin whenever their bets go sour. Guess which strata gets most of the flak.
Your heart is in the right place, but you are doing the devil's work by accident. "extortionate rates" and "printing money" do not happen at once! We have low interest rates, which are good for debtors. The banks now will get very little interest on those mortgages, so that can't be the sole piece of they are making a killing.
What also happens is low interest loans allow the value of land to go up, and land speculation works too well. Worse, there are laws and other things preventing density so the desire to have as many tenants as possible doesn't actually reduce the cost of floor area.
It's actually quite interesting. Keynes figured out that government stimulus works but it only solves the money problem. When you solve the money problem people simply flee into a different asset that maintains its value. That asset is land. So the business cycle also results in a real estate cycle. "Solving" the dot com bubble encouraged land speculation and ultimately ended in 2008.
The problem isn't the stimulus although there are alternative proposals to reduce the amount of government intervention. Land is simply unique in the fact that it is already there and private land ownership is merely the right to exclude people from the land. There simply isn't any good argument for why money earned off the land itself should go to a private individual. It should go to the government because it is protecting the land with its army and building infrastructure to maintain its value.
> There simply isn't any good argument for why money earned off the land itself should go to a private individual. It should go to the government because it is protecting the land with its army and building infrastructure to maintain its value.
Is this not what happens, in a distributed way, via property taxes?
> The banks now will get very little interest on those mortgages
Banks make relative profit on rates. Lower rates usually means the relative profit increases. Then, because as rates fall and prices increase, the volume of mortgages increases.
> Lower rates usually means the relative profit increases.
The spread increases? Not necessarily.
> Then, because as rates fall and prices increase, the volume of mortgages increases.
Because housing prices go up in response to lower rates, I am not sure that is the case. You can almost think of the total payment being the same, and adjusting the principle/interest ratio.
I think large exurban tracks are how they try to boost volume.
> As long as rates fall, banks win.
Doesn't follow from the rest. Homeowners---whoever can afford it, typically do well relative non-homeowners who really get screwed over here. Homeownership in general is bad, in that other ways of doing housing would result in better land use and growth, but this is because low density is loose-loose, not because banks make more money that way.
You're presenting it as he has an infinite money supply and just of pure stupidity and greed doesn't want to pay $20 or $50 per hour. Maybe his supply is not unlimited, and maybe nobody would buy a taco for $50 and he knows it, and he made the calculation and decided there's no way to pay all his costs, charge the price that people would be willing to pay, and make a profit.
Now, if you know how to do it, there's a big opportunity for you just opened up. You could buy the place (probably for cheap), hire the cooks for $20 or for $50 (they would be ecstatic to work for you, I am sure, you're not that previous greedy owner and would pay them lavishly) and become the model of a businessman. People love good Mexican food. I know I do. I know many people that do. You can't lose, really - it's a mystery why there aren't more Mexican food billionaires... It's so simple, after all.
Somehow most of such attempts I've heard of never turned a profit and shut down soon. Maybe those restaurant owners know something about their business that is not obvious to a random person only reading newspaper headlines...
>Maybe his supply is not unlimited, and maybe nobody would buy a taco for $50 and he knows it
Not true.
>While Chipotle raised wages from $13 to $15 an hour, or 15.4%, menu prices, on the other hand, were hiked between 3.5% and 4%. Price increases are generally quite small relative to the increase in workers' wages.
>he knows it, and he made the calculation and decided there's no way to pay all his costs, charge the price that people would be willing to pay, and make a profit.
How does he know for certain? He never even tried raising prices.
We're not talking about a multinational chain spanning continents with billions of dollars in revenue, tens of thosands of employees and a NYSE stock ticker - and not just any ticker but a part of S&P 500! Such a corporation has a lot of means to raise salaries a little without going under, they could borrow millions, they could issue stock, they could sell assets (which they have in millions), could restructure business, etc. etc.
We were talking about a single shop owner which usually doesn't measure revenues in billions and runs everything out of his own pocket and bank loans usually backed by the same pocket. If you don't understand the difference, maybe giving advice to businesses shouldn't be your primary pastime.
> How does he know for certain? He never even tried raising prices.
Sure, such a thought would never come to his mind without your help. And surely, a business owner would never know a thing about his own business and his own pricing without you instructing him on it with such a sage advice as "just try it!". Maybe tons of people would line up for $50 tacos and only the stupidity of business owners - which, as one, for some reason, choose to ignore your advice to just try it, which would make them billionaires - prevent it from happening.
Seriously. How much disdain one must have for people actually living the thing...
"living wage" is an emotional political term - there's no objective definition of it and instead of appealing to rational argument it appeals to irrational notion that somehow you can live on $20/hr but would die if you received $19/hr, and so it's somehow a moral imperative to pay $20/hr (and in a year it turns out it's already $25 that is a moral imperative because somehow, out of nowhere, prices have risen!).
I'm not talking about literally $50.00 for a taco. I am talking about business owners who I'd assume know their business a bit better than a rando from the internet. And about the necessity of not thinking everybody but you missed a completely obvious solution like "just raise prices" because they don't understand anything about their business, but you do. It's usually not that simple.
A living wage is defined in the dictionary as "a wage that is high enough to maintain a normal standard of living." Now we could argue about what a normal standard of living qualifies as but I think we can agree that it includes at minimum room & board for the individual.
By that meager definition a lot of restaurants don't pay a 'living wage'
Are there a lot of anecdotal stories of "I raised prices and I had to close shop because of drop in demand" ? All I see are people just shutting down and giving up.
The restaurant business is very hard. It’s not clear why anyone does it to be honest; the skills required to successfully manage a restaurant can net you a lot more for a lot less work in other industries. Of course people just throw in the towel. After getting kicked in the face by COVID why stand back and get kicked in the teeth again by government policy?
This is market forces at work. There is not necessarily someone to blame, generally speaking. I expect we'll see prices going up, wages going up and margins going down. I think that is good since I think we have gone too far in the other direction.
What frustrates me about economics (with my one intro class level experience) is that they could only talk about equilibrium. The dynamics of things changing like this is what would be really interesting.
Equilibrium is a theoretical construct. Life is dynamic, there's never anything fixed, there's always disruption and change. The theory needs artificial constructs to be workable - and some models get close enough to reality to be usable and give useful predictions and tools - but the life would always be more complex.
That is correct. Which is why people are refusing to go back to work. The wealthy get wealthier and those at the bottom are getting left behind, with no insurance, hugely expensive housing prices. The dynamics are saying "F you". Perfectly realistic and playing out right now.
I’m not clear on your interpretation. Aggregate demand/supply and such models you find in Econ 101 are all about demonstrating the effect of things changing, as you just described. In a supply shock for example, convergence to equilibrium is the change.
Christ, people here and their taller than standard horses. My girlfriends dad owns a pizza place and walked away with $5k last year, after paying rent, supply and wages. Where do they magically pull this money from? They aren’t evil banker types with bags marked “$$$” full of money like people here seem to think and it is disgusting they’re considered cheap instead of just “people will absolutely not pay the increase in price” to pay for these wage increases. This man is one of the most hardworking and honest people I’ve met, as opposed to the people I meet working in tech.
Well presumably all restaurants would have similar issues hiring cooks so prices should rise everywhere. I would wager that demand for restaurant food as a category is less elastic than demand for any one particular Mexican restaurant's food.
At the margin consumers are sensitive to price. A family of 4 might skip out on getting drinks with their order if the price goes from 36->40$. Drinks are where the entire profit for many restaurants comes from.
In terms of total market, the effects are well studied in the field of labor economics.
Big producers can easily absorb the added labor costs. They outsource some elements of their labor (prep work). They simplify menus for better economies of scale. They cut back hours on marginal employees and add hours for high productivity ones.
Small shops without economies of scale struggle and go out of business. A restaurant owner that owns 1 restaurant is likely working full time to keep it afloat. The added time to respond to the current labor market can break the camels back. vs. McMegacorp that has people that sit around and optimize cost all day long.
So the trade off is more McDonalds and Chipotle and less Albertos burrito stands.
This is one of the reasons why companies like Sysco and US Foods have been pushing more and more pre-prepped packaged menu items that restaurants can just heat up and serve. USF calls these Scoop items: https://www.usfoods.com/great-food/scoop-.html You may have noticed how lots of places, including mom and pop shops seem to suddenly have nearly identical menu items and it's partially because of this trend in the foodservice industry.
They are basically taking the economy of scale that a large chain previously exclusively had and bringing it to the market to street sales (e.g. mom & pop joints). They simply took what they were doing for institutional food service and expanded it because it's substantially more profitable for them than selling the raw ingredients.
If it worked this way, why not have a $1000 pizza? Raise it a thousand times and... Obviously, it doesn't - at some point, raising it a dollar will start losing customers, it's obvious. Now, where is that point? Do you know? Does business owner know? Who would be the better expert in determining this point - they guy who runs a pizza place or a random guy on the internet whose experience is more like ordering pizza online?
Yes, thank you for demonstrating that reductio ad absurdam is still absurd.
"You could do better if you raised prices a dollar" and "you would do worse if you raised prices a thousand dollars" can absolutely both be true. In fact, in many, many circumstances, they will be.
> If it worked this way, why not have a $1000 pizza?
This blend of slippery slope argument is all fine and dandy, but the key point of this discussion is that there are operational expenses and revenue and if your business plan depends on a never-ending inflow of cheap labor from people willing to work for below-poverty wages to drive down your operational expense then not only is your business model completely unrealistic but you also have to take a step back and seriously considering your net contribution to society.
I mean, think about it: why is a 1000$ pizza supposed to be a ridiculous idea but 8$/hour to make said pizza is not shocking? Is it reasonable to assume that the person making the pizza should be forced to work about 3 hours making pizzas before he could afford one of his own?
There are a lot of factors we do not know here: I was an investor in a small restaurant as I wanted to keep it open after the owners quit. Upping anything on the menu $1 would've killed the business dead because all surrounding restaurants where already cheaper, but we had better cooks, however people are frugal or poor or both and they were not that much better to make the difference that much bigger. We still ran at incredibly thin margins: amounts that seems weird to me as an IT guy. It depends: depending on your location (both country and inside that country) it can very well be that you cannot up your prices even a cent or people won't come back. We had that with beer: our neighbour's restaurant upped the price of a bottle of beer with 10cts and suddenly all the regulars came to drink at ours and eat at theirs (cheaper).
A pizza place in the center of a popular city with high ratings probably can up the prices.
Before we left San Diego I offered quite a few times to go in, unpaid, to help out. This man works 6 days a week, open to close. I don’t know what sort of upbringing people on this site seem to have but it doesn’t feel “working class” to me most of the time.
Actually helping run this place showed me how skewed this world is. I met many hospitality service owners, small ones mostly and most of them are lucky to take 5-10k profit in a year in total: that while most people I know in software and management get angry when they cannot go on multiple 10k vacations a year...
He isn’t, him and his wife earn around 40k total before tax. It’s possible but it isn’t fun. I talk about it elsewhere in the comments. She works as a preschool teacher.
> Upping anything on the menu $1 would've killed the business dead (...)
You could have a point if you didn't picked an example from an industry where you count on customers to expense additional charges to subsidize employees' wages in the form of tipping.
raise prices by a buck a pizza. people will absolutely pay it.
Perhaps in some cases, but far from always. Down the street from there are 3 'cheap' pizza places within a ~5 minute walk from each other, that all server basically identical quality pizza at essentially the same price. If any one of those where to raise their prices people would almost certainly not pay and just go to one of the other places instead.
There is also a 4th place that serves much higher quality pizza and charges 50-100% more than any of the other places as it is. If they where to raise their price by a buck then people would no doubt still pay since the people who go to that place have already proven themselves less price sensitive.
another trend i've noticed around here at least is that many of these legacy restaurants are owned by boomers who are well past retirement age but basically just kept going because it gives them something to do. when the economics shift too rapidly and hurt their ability to break even, they're far more likely to simply close up shop than try to take on risk and hope things work out.
$5k total. That’s his salary. They make maybe $40k before tax on a good year, over the two of them, him and his wife who works as a preschool teacher. They’re both almost at retirement age at this point and are going to work until they die.
Yeah. Real nice to go to the extremes. What's next on your argument list...that we should all kill ourselves and there won't be any supply and demand and therefore have a permanent solution?
No. What I am saying is that if you are only earning $5,000 per year, you should go out of business, because clearly, that person is a horrible business person. Maybe he is not doing any marketing. Maybe horrible food with substandard ingredients. Maybe he never heard of the maxim "location, location, location." Maybe he never cleans the restaurant and it is a filthy mess and has a filthy bathroom (I've been to restaurants like this, and immediately walk out - if they can't clean the bathroom, what does their kitchen look like?). Maybe he spending extravagantly on stuff that doesn't make a difference. Maybe he has too many employees.
I used to live in San Francisco, which is a real foodie town. People go out to the restaurants all the time - plenty of people, and lots and lots of small restaurants. And there were restaurants opening and closing all the time, and there were restaurants that have been open for 100 years.
The restaurant business is one of the most unforgiving industries that one can get into. But, there is no reason at all to go out of business, unless one needs to go out of business because they are a shitty business person, or if tastes and mores have changed, whatever.
Small businesses have notoriously high rates of failure, restaurants seem like a huge risk with pretty modest possible reward. My guess is you'd be more likely to get rich being a pro athlete than as a restaurant owner.
Yet they get treated like evil "fat cats" by a certain section of the intelligentsia. Many of whom simultaneously believe global mega corporations who profit from wars and dictatorships, avoid paying taxes, bust unions, use slave labor, and buy politicians and influence elections are noble justice warriors. It's really strange.
> Small businesses have notoriously high rates of failure (...) Yet they get treated like evil "fat cats" (...)
A small business can still be exploiting workers with abusive labour and business practices.
If your business model relies on working your employees to death while paying close to nothing then, regardless it's a golden goose or a money pit, then you have no right to complain that you're being held accountable for exploiting and abusing workers. Moreso, you have absolutely no right to complain that the job market rejects your exploitation.
I live(d) only in countries that enforce it and it definitely makes a huge difference in consumer prices. Places that are ran 'by the family' here have their family do all the work for free (usually their kids and the parents running it all); in exchange they get pocket money, a roof over their head and food. But they are very cheap employees. Now compare the food and drink prices to a place with official employees and matching wages. Even at minimum wage (which is the norm here for restaurants and hotels), the difference in consumer price is massive. It is between having a lunch for E5 or E25+.
I think that is a fair point and anecdotally at least it gels with what I have observed. I've worked in quite a few food service settings when I was younger and the margins (in general of course; Soup du Jour is like 5/600% margin at least) are very thin.
However I wonder if this isn't just a symptom of the bigger problem; in order to pay better wages, consumer prices have to be raised because it's the only way to make enough margin to pay the employees BUT the real reason margins are so thin is because you are paying exorbitant rent to some faceless landlord who actually owns the building you operate out of; and it only ever goes up, never down; and your suppliers constantly raise their prices (or lower their quality) because they are in the same boat; and thus all that money that is generated by the tip of the spear (the restaurant, the retail store, the pub) is mostly being pushed back up to....the people who already have all the money...which is why they own all the buildings and rent them out to make more money....and so on. Just a thought :)
Depends on how you look at it. If the owner has 10 restuarants, and is making $750,000 per year, let's say, then he or she does have an unlimited amount of money, compared to the workers, especially if the workers are making the federal minimum wage of $7.25.
If they have a small mom and pop company that cannot pay workers at least $50,000, then they need to go out of business. Then, as more and more shops go out of business, then there will be less of a supply and then the company can demand more money from customers and pay their workers more. Except, the reality is that the owners WILL make more money, but still won't want to pay their employees more, and will give the same line - that that type of labor is unskilled and f-ck them, which means more money for the owner. That's the reality. And if true that the labor is unskilled and the owner shouldn't pay more, then the workers should not come back to work.
All the Wall Street journals and pro-business journals and business videos have mouth noises that people don't have to accept the wages and it is voluntary work. But, when it actually happens, the cry like a bunch of little babies and say that the worker is at fault for not wanting to work for no insurance, shitty wages, and not being able to afford housing. Well, let the business owners do all of the work without workers, and get all the money. Sounds good to me.
You like your Mexican food, but only want to pay .89 cents for it? Good. You go grow the beans, grow the wheat or corn to make your own tortillas. Buy and milk your own damn cow in order to get the beef and milk the cow to make sour cream, and grow an avocado tree to make your own guacamole.
It's ok. Do it yourself. Let all the cheap restaurants go out of business. Deal with it.
And that the story. That's the REAL story, not the one that you are making up.
However, there might be a solution. If a business shows me all their financials, ALL of them, and the personal financial statements, and if I see that they are not making a lot of money, that's fine, maybe I will work for them. But if I see that they have 10 restaurants and make $750,000 per year, well, f the f out of them. But, business owenrs, show me your financials. You don't want to? Fine. Do it yourself. But I'm not going to work for $18,000 with zero benefits, while you're making $750,000. You say your contributions is worth more? Good. Do it yourself. I, and everyone else, don't accept that wage anymore, so do it yourself and go out of business, and you won't get that $750,000 per year anymore anyways.
That does not work for me. The owner can just pay himself a $1.5 million salary that erases any profits, just like the movie industry is so adept at doing. They can also start other companies, and buy stuff from the other corporations in order to suck out any profits. Or maybe suck out enough so that have the smallest profit to share, and then take the money out from the other paper corporation and give themselves that money through that corporation instead. This is pretty basic business stuff. Apple Corporation, for instance, takes all of their profits and puts it into Braeburn Capital in Reno, Nevada, in order to avoid California franchise taxes, and other states as well, which has over the years, been billions and billions that would have gone to those states. California has 8 or 10% business taxes for example. Nevada has no business taxes. I think Braeburn has $150+ billion in it, or something like that. Then, of course, it can take that money and shove it out to countries with no taxes at all, so they pay no federal taxes at all, though techniques like the "double-Irish with the Dutch sandwich", which is an actual name of a scheme that corporations use. IP tax avoidance is another example - you sell all you IP (intellectual property) rights to a coporation set up in the Cayman Islands. The corporation in the USA or other countries then have to pay for the IP rights to sell those products, so they pay out to a legitimate company in the Caymans all their profits.
This is why there is a push for a global tax.
Anyways, the point is that there are a ton of ways to reduce or eliminate profits. If I was a business owner making $4 million profits, I'd reduce the profits so that each employee made an extra $1,000 to 50 employees for $50,000, they won't be squawking and bitching and are happy, or a little bit better, about the piddling amount.
> If they have a small mom and pop company that cannot pay workers at least $50,000, then they need to go out of business
why? if people choose to work there it's consensual, if they don't then sure but they don't need to. and what's wealth inequality look like when we're left with corporations and chains owning everything? when small mom & pops can't compete or even get off the ground.
That is what I'm saying. Employees are NOT choosing to work, because income disparities are too high. For most of the 20th century, tax rates were from 70% to 90%. It changed to around 35% in 1986 after Reagan passed an act setting it this low. And that is when the rich started getting richer. In 1965, CEOs were making 20 times more than the lowest paid worker. Now it is 300 times more.
I say that employees should not go to work for corporations and chains, either. F them all.
I have some sympathy if the mom and pop if they barely make any money, but there are some mom and pop places out there where the mom and pop own 10 locations, which is not huge, compared to chains. But they are making $1.5 million in income per year, all the while they are making sure that employees don't work more than 30 hours per week so that they don't have to pay benefits, no health insurance, treat them like crap and not dignity. I know that all businesses don't do this, but probably 95% do, even though I have no citations for this. But I rarely read about those companies who do. And don't say many do, but nobody hears about them. No way.
And again, for the person making $5,000 per year, who cares if they go out of business. They are NOT doing it right. It is only logical that they should get a janitorial job, or work in a stock room for $30,000 per year. It's just logical. And, with making $5,000 per year, their restaurant is probably filthy, bathrooms filthy, substandard ingredients, dirty kitchen, sh-tty chairs and tables, indifferent wait staff and cooks. Again, not every single one. But if you're making $5,000, that sure is the way to bet.
Furthermore, if there are only companies like Amazon making all the sales, then that is a monopoly, and it should be broken up. Monopolies are the bad part of capitalism, and is why the government should break them up. That is what they did with AT&T in the 1980s and telecommunications really took off after that.
10 restaurants would be 100 employees. $50,000 for 100 employees is sustainable according to you? The owner would be in the red by over $4 million every year
Then all owners need to raise their prices while protecting their profit margins.
Or alternatively, fine, do it that way, but look at the owners' financials and wealth (not just income). If they are making $1.5 million per year, then lower that to $100,000 per year and get gold health insurance for employees, have employees work 40 hours per week instead of jaded sh-tty owners only scheduling less than 30 hours so they don't have to pay benefits and employees have to work 2 jobs, have them not treat employees like sh-t. That also works for me.
In 1965, CEOs made 20 times (2,00% more) the lowest paid worker. Now it is 300 times (30,000% more) than the lowest paid worker.
For most of the 20th century, the tax rate for the wealthiest was 70% to 90%. And this was NOT only during the war years. It was around there from 1918 to 1985, when the top rate was lowered to around 35% and stayed there since. That is about the exact time that the rich got richer, and everyone else stayed about the same, or went down, due to inflation.
And if you say that the owner took all the risk to start the business, fine, cool. Let them do all of the work without employees. I'm good with that.
What you say is yet one more specious argument to pay employees less so that owners can buy more yachts and bigger houses. But fine. Do all the work in 10 locations, all by yourself. Good. And good bye.
>If they have a small mom and pop company that cannot pay workers at least $50,000, then they need to go out of business.
wow, this site really does skew toward coastal cities in the US doesn't it? $50k a year is a high end white collar salary enough to buy a (often significantly) better than median home on a single salary and enough to be considered in the upper 25% income for most of the places I have lived.
I think one of the biggest problems in politics in the US is that we have such a diversity of experience and needs in this country and most politicians (and perhaps voters) think that the solutions that are best for their local area are actually good for the whole country - when in most cases the experience across millions of people and thousands of miles from rural to dense urban is so different that almost no nation wide solution is very good.
It's not a coastal thing, its just "any major city" thing. 50k is not enough salary to buy a better-than-median home in any of the major Texas cities (Dallas, Houston, Austin, San Antonio). It might have been enough in El Paso, but probably not since the recent housing bubble.
Sure, not everyone lives in a major city. It doesn't make a lot of sense for a line cook to make $50k in Victoria or Amarillo. But in these places, they are not being paid the ~25-30k which could be equivalent to about $50k in the city (which still isn't enough to buy a house). They are being paid $7.25 an hour and the tips aren't so good.
You totally miss the parents point, which is that most restaurant workers are barely paid enough to rent and eat, to make the point that the US has a diversity of CoL.
This does not skew at all towards the coastal cities. In the coastal cities, even a two income home, with both people earning $300,000 cannot even afford a home. $50,000 would be a joke of a joke.
First thing: let me ask you this...are you a business owner and have a vested interest in keeping wages down? Or maybe your parents or friends are business owners and you sympathize with them?
This is not about whether it is a coastal or rural issue. It is about a fairness issue.
No matter what city, rural or urban, if a business owner owns 10 locations and is making $1.5 million per year, let's just say for example, and he or she is paying $7.25 per hour for a total of $14,500 per year, and with zero health insurance, only offering 30 hours per week in order not to provide benefits that they do have for full time employees, and treat employees like sh-t, F them. I don't care if $14 is a lot in a rural area. That's not the point. I know you want it to be the only point to argue, because maybe it in your best interest to argue only that point.
However, even if it is only politically/philosophically your point, like maybe you are a libertarian or something, your viewpoint is probably that employers are free to offer any wage, and employees are free to accept it or not. Well, what is happening, is that employees are not accepting in droves. And this is causing business owners to say, "No, we don't mean free offer and acceptance, what we means is we say that in order for us to not seem like the total c-nts that we are, but now that people are taking us up on that and not accepting our offers, we want to cry like the whiny b-tches that we are and complain about how people that should be working for us, are not, and now we can't make $1.5 million while paying them $14,500 per year." That's what this is really about.
And there are a lot of other false arguments. That "the owner took the risk and is entitled to the reward." Fine. Ok. Great. Do the whole thing yourself then. Perfectly fine. Go to it dude, or dudette. Knock yourself out.
Or, sometimes people say that the money is "all on paper", another shitty argument. Jeff Bezos only takes an $80K salary, and is taxed only on that. Most of his wealth is "all on paper." So, you (not you you, but those who say it is paper wealth, I don't know if you do) are telling me, seriously, that if Bezos goes into a bank, and the banker knows it is Bezos, and Bezos applies for a loan to buy a $10 million home, that the banker says, "No, you only have a salary of $80,000." That is because the "paper wealth" is actually collateral, as are all the equipment, inventory, real estate, etc. Same as any business owner.
Another fallacy is "the business owner can't re-invest if they pay out larger salaries and provide more jobs." Yeah, right. With their multi-million homes, and vacations to Gstaad, Switzerland and safaris to Africa. I haven't seen Jeff Bezos do one god damn thing with his $200 billion, except keep trying to drive his employees wages down and trying to keep them from unionizing. Yet, HE doesn't want to keep HIS salary down, and recently bought a $150 million home in Los Angeles.
And, yet another fallacy, "business owners pay 80% of taxes." Who give a fluck? They should pay a lot more. You think this is ridiculous and communist? You have been brainwashed by the all-pervasive media. If one is into MAGA - Make America Great Again - or a libertarian, or whatever, you have to realize that if you turn back the clock, for most of the 20th century, tax rates on the wealthiest in the highest tax bracket was from 70% - 90%. It changed in 1986, when Ronald Reagan got it reduced to about 35%. And that is about the exact time that the rich started getting richer and poor started getting poorer.
In 1965, CEOs in the US earned 20 times more than the average worker but by 2015 it had risen to 300 times.
> But if I see that they have 10 restaurants and make $750,000 per year, well, f the f out of them. But, business owenrs, show me your financials. You don't want to? Fine. Do it yourself. But I'm not going to work for $18,000 with zero benefits, while you're making $750,000. You say your contributions is worth more? Good. Do it yourself. I, and everyone else, don't accept that wage anymore, so do it yourself and go out of business, and you won't get that $750,000 per year anymore anyways.
How did the owner get 10 restaurants? They likely started with one and carefully scaled up over time as they could afford to, each time taking on risk that they fail and wind up with less than what they started despite all the effort. The business exists to benefit them, not to provide a place for people to work, that's a consequence. One reason employees make less than owners because there's less risk involved. They show up and do a job in exchange for money. Most employees have no equity in the business.
If you want to become a big shot owner making hundreds of thousands then you need to do it yourself and put your capital at risk, become a partner, or get a loan. There's no guarantee it will pay off but there's incentive to, which is why people do it. If there's no incentive or it's not great enough and the risk won't be taken. That means less people opening or expanding businesses, which leads to less opportunity for workers as there are less demand for their labor, and less wealth for society as there is less stuff to spend money on.
If you're not comfortable with the risk of being an entrepreneur and someone is willing to pay more for the same labor you're well within your rights to work for someone else.
> How did the owner get 10 restaurants? They likely started with one and carefully scaled up over time as they could afford to, each time taking on risk that they fail and wind up with less than what they started despite all the effort.
I don't know what point you tried to make, but it's completely irrelevant if the business owner scaled things very carefully, blew all his YouTube money on restaurants all at once, or inherited his family business. How the business came to be is totally irrelevant.
The only relevant point is how employees are treated, and if it is fair or not. If not, and this is the key point, why should anyone continue working for a business that abuses and exploits them?
Are they paid fairly or a slave wage? Can employees live on their paycheck or do they need food stamps to get by? And are employees expected to endure hardship just to finance their bosses' careful or reckless expansion strategy?
What we're seeing is people answering those questions with a resounding "no". There are far better things in life than work yourself to death to feed a "very carefully scaled business" that earns the owner a small fortune.
People exist for reasons other than validate someone else's business model, and there is more to life than working shifts for peanuts at a "carefully scaled business".
Absolutely! I don't owe you anything so why should I be obliged to work your less than $20/hr job if I don't want to?
I find it absolutely arrogant of restaurant owners.
Your restaurant doesn't have a right to be in business and I am not obligated to work for you.
> a) be willing to drive your business into the ground serving a limited menu because you won't hire a couple cooks at $20 an hour, or
>
> b) have a business so close to the brink of shutting down that an additional $20-50 an hour will shutter you.
Restaurants run on notoriously thin margins ( https://upserve.com/restaurant-insider/profit-margins/ ). There's a reason restaurants often fail even in good economic times: even small miscalculations or mistakes can put a good restaurant out of business.
Maybe we need buffet-style restaurants that serve nutritious perishable food without all the extra plating, waters, and other frivolities so people can bask in being served and pretend they are aristocracy.
Everyone cooking is a massive inefficiency, and yet paying for conventional restaurants is also uneconomical. Eating shelf-stable food is cheaper than cooking for most people, but only until the bad health effects catch up. Just like global warming, the market can only optimize over small time horizons without politically pricing in externalities.
I tried to look into that. I think problem is two fold: 1. options 2. audience
1. options: I need to be able to serve two or three meal options tops depending on what is available / inexpensive. People really like having options but that drives costs up which will drive me up a wall.
2. audience: I need a captive audience such as prisoners in a prison or resident college students who pay for the whole semester at a cafeteria.
1) I personally hate choosing things from menus as as I truly like all the food "that isn't bad" (for all dishes there exists a pareto equal or better dish which I like. Something like that?) That fact that a single dish du jour can get more attention an planning re seasonal ingredients and other inputs due diligence is a huge plus too.
2) I am also fine committing to eating at the same restaurant once, twice, maybe even 3 times a week, and do that anyways.
Those aren't the only options. You can have small street-food vendors. The costs are much lower because there's no waiter etc. But it's more of a functional thing ("get food, go home fed"), not a pleasure thing where you sit around with friends or your partner and talk while someone serves you food.
Yeah that is good. Bums me out that we force them to use gas generators and not have running water mainly to avoid extractive rents, but that can be fixed. Mandating you bring your own container as I swear take-out contributes a huge portion of urban trash would also be a doable improvement.
I think the issue is less intractable that it might sound. Food delivery could pick up last meal's dishes. Or offices could have dishwashers.
That trash is so cheap, and sources of trash so unregulated (because just raising the cost of trash leads to litter --- need to impose cost on the producer not consumer) got us in this rut. The inconvenience you speak of is more effect than cause.
Yes and no. There's really not a whole lot of margin in the food. You get margin from buying a soda, beer, or wine in wholesale and selling it with barely any labour at a 5x markup.
My parents tried a buffet thing once, didn't work. You need a certain amount of scale that wasn't present in their area. I have seen some proper huge buffet places though, seems pretty good though rent is an issue.
I'm not arguing the economics work out given today's prices and all sorts of disequilibria. I'm just saying everyone cooking is ipso facto inefficient, so they has to be some context in which communal eating is economic.
If that is buffet-style and a hefty land value tax to stop landlords from milking the restaurant, so be it.
> Maybe we need buffet-style restaurants that serve nutritious perishable food without all the extra plating, waters, and other frivolities so people can bask in being served and pretend they are aristocracy.
Aside from buffet-style, casual, fast-casual, fast-food, and street food outlets fit in the “prepared food without, or without as much of, the frivolity that simulates aristocracy”. It’s not exactly an underserved space.
It's definitely a welcome development, but it still costs more than cooking your own meals and cleaning up by a whole lot, so something is amiss. (As I wrote before, I don't mean to say it is all the restaurant's fault, it could be rents are simply too high.)
When you say it costs more to eat out, are you factoring in the cost of your time?
If I spend an hour and a half prepping and cooking dinner, but I managed to buy that ingredients for $10 less than what I would spend at a restaurant, it's still cheaper to eat at the restaurant if I factor in the time I spent.
>When you say it costs more to eat out, are you factoring in the cost of your time?
Just an addendum: if that time would have been spent, say, watching TV (and you are a healthy adult that doesn't have any psychological or physiological benefit from watching TV) then the time cost is possibly negligible.
Full time salaried workers can't easily convert additional time into money.
I mean there are many ways to overwork oneself, and I suppose the fact that I often am just too mentally drained after work to do all the cooking anyways speaks to a similar malady.
I think we do see PP's point with poorer people with horrendous commutes, part time inconsistent jobs, etc. Lot's of anguish about "food deserts" of course, but I think there is a larger reckoning that we simply need to reduce work and commutes before dual income people at all levels can afford to cook real food.
Restaurants run the gamut from the dinky places not much larger than kiosks that simply microwave your food on demand to really fancy and expensive businesses. And the dinky places do have higher profit margins, assuming they don’t overstock the place. Of course, people applying for jobs in the dinky places don’t expect to get paid more than people working at fancy restaurants (with slimmer profit margins and higher labor costs).
And that’s not considering people willing to lose money so they can own a coffee shop!
One of the recommendations for lowering costs is to reduce turnover. Which you can do by paying more, assuming the higher pay costs less than training new staff.
My point is only that restaurants are famous for having tight budgets. It’s no surprise when restaurant owners say they can’t absorb even small cost increases.
Restaurants, Fast-foods and bars are already quite expensive. That's why they are competitive: customers are very sensitive to price, and have limited budgets. It's like airlines.
Raising the prices would not work. If it did, some of them would have already done it.
The thing about being a business owner, is that you are the last one on the payroll (if you are a good owner).
All the bills get paid (including wages), then you get what's left over. If you had a good week, then you get a nice stack of Benjamins. If you had a bad week; maybe not so much. In fact, you may even need to chip in, to keep the lights on.
I have seen, many, many SMB owners start living "high on the hog," as soon as they start doing well. They buy a 5-bedroom house in a marqée neighborhood, a C-class Merc., LV bags, etc. I know, for a fact, that most of them make far less than I ever did. Frequently, they get the company to pay for a lot of it (put one bullet in the chamber, and give it a spin).
They have gotten used to living large, and it's damn difficult to downsize, after that.
So that means they need to do everything they can, to make sure the last pile is as big as possible; regardless of how the corporation is performing.
If they banked on hiring undocumented workers, or skilled artisans at rock-bottom prices, and that pool dries up, they are left with the choice of leasing a Subaru, and selling the Jag, or trying to make whoever has been loyal enough to stick around, fill in the gaps.
Or it’s to get paid for bearing all of the risk of starting and running the business, and being financially on the hook for when it fails and gets to deal with years of being sued.
You did indeed find the point. Think about the "framing" the next time you hear people talk about "entitled free-loaders" refusing to work because they get the government cheese.
The problem is that they do not want to be financially on the hook. They keep the good years and spread the costs of the bad years onto their employees.
A business owner is the last one on the payroll, so they get the extra, if things go well, but they also assume pretty substantial risk. If things go badly, the buck stops at their front door; possibly on an eviction notice.
I have also watched many of these same SMB owners, hit the skids, and they fall hard. Many wreck their credit for decades, destroy any retirement savings, and, worst of all, suffer terrible self-respect damage.
I'm not being snarky, there. That demolished self-confidence can be bad. I have known folks that have become suicidal, after losing a business.
Makes being smug, kinda hard. They may have been jerks, when they were doing well, but it's quite sobering, to see what happens, when things go pear-shaped. Doubly so, if they have a family.
I don't see small business owners as morally superior to workers. We're all just humans.
(And yes, starting a small business where you are able to leverage a bunch of other people's labor is still the most reliable way to become a millionaire in the US.... well, besides buying a decent house a few decades ago in California and becoming a NIMBY.)
Yeah because you clearly understand his entire financial situation and profit margin to justify that cost right? How are you so sure customers pay the higher food prices? People think small business owners are swimming in money, and that’s just not true.
That rock-and-a-hard-place choice is often what happens when a business dies, right? You live between your costs and your income. This may just be the business version of the 9/11 falling man.
It may well be that the market for food places in your area cannot support the current set of outlets, and some of them will have to die, and this is how they die.
The way I think about it is there's a metastability in the economy that's not often discussed. Basically, unviable business models can survive small disturbances. One chef gets fed up, no problem. One customer think it's too expensive for what he gets, no problem. When there's a big shakeup, it all comes crashing down.
A cultural shift may mean that people collectively decided that they will, for example, spend 8% of their income on eating out rather than 12%. That represents an aggregate decrease in demand and would indicate a negative sum game (something most of HN seems incapable of comprehending)
I am not in the Restaurant business, so I don't know how many meals they typically sell, or how much they charge.
Let's say he pays his cooks 30$ more. How long are they open, how many people work in the kitchen? Two people, 12 hours? So that would be 720$ more per day.
How much do they earn per meal? In my country in most restaurants charge around 10$ for a meal. Even assuming no costs for the food resources, that would mean 72 more meals to sell, per day.
I've read that food margins have been extremely thin for many years - well before the pandemic. Maybe the owner is just tired of working his ass off for not much in return, and staffing problem is just the straw that broke the camel's back.
Maybe the owner would be better off with unemployment!
Restaurant margins are very thin. The extra 20-50$/hr is literally the owners salary for running the business. Why do you think they will continue to run the business making 0$ ?
Amazing is the cognitive dissonance on display. The business owners one and all took the PPP loans which were essentially grants, and that was OK, but when it's for the workers it's destroying their predatory businesses. And they would rather close than make less profit to pay a living wage. We already get no healthcare and no retirement. How much further down can we be pushed?
It’s not an additional $20-50 an hour it’s the doubling of their single biggest expense in a sector known for extremely thin margins at a time where all of their supplies are also shooting up drastically in price.
What makes it obvious that this is a worker’s rights or wage gap? Aren’t people able to demand higher than normal wages or simply not work because they are propped up by a host of COVID measures like stimulus payments and eviction moratoriums? That is skewing the market and being used to push for higher compensation. It’s not much different from cheap money supply at low interest rates increasing the price of assets.
When you’re used to pay little amounts of money for things, it takes time to rewire your mind. I remember being upset at chocolate or cheese prices when I moved to California for at least one or two years.
One has to have a rudimentary understanding of business in order to understand the realities of a forced high minimum wage. Restaurants and manufacturing operations can’t do not operate in a distortion field where external realities do not matter.
In the case of the restaurant, what they are able to charge for their product is governed by myriad variables, some of which are: location, competitive landscape (how many, distance, kind, etc.), audience dynamics (breakfast and lunch crowd or spread across the day and evening), etc.
Competition drives both prices and margins down. Once an area has reached price stability, it is very hard to raise prices. So, you are selling a burger for $10 and, if you are lucky, you make $2 to $3 on it. Depending on the nature of the organization, delivering burgers might require 5 to 10 people.
Along come politicians pandering for votes and push for a 50% increase in minimum wage.
This increase causes a chain reaction through the entire wage structure. The guy making $10/hr now makes $15. Someone making $15 makes $20, and so on.
Most people don’t stop to do a bit of math and understand reality before accusing business people of being evil, greedy, or both.
What ends up happening is that the thin margins and realities of the market can’t support the delta in cost structure. The business either controls costs or shuts down.
How do you control costs?
Less people doing more or less people and automation. A few more options, but that’s the basic idea.
In other words, the politicians get the votes and continue on their sweet power ride. Those who voted for them lose their jobs. A bunch of the businesses who created jobs shutter. Fantastic deal, isn’t it?
I am in the process of setting-up a manufacturing operation to produce up to 100K of our products per month. We want to manufacture in the US. The ONLY WAY this is even remotely possible is through automation. We are explicitly designing both the product and the manufacturing process for as close as we can get to lights-out manufacturing. We cannot afford hordes of people at $15/hr. The only alternative is to go to China, Taiwan, Mexico or other shores. That’s the reality we have created for ourselves through what I can only describe as ignorant voting decisions that only benefit politicians.
Everything we use in manufacturing comes from China. We can either understand this reality and think of creative way not to lose even more job-generating industries or we can continue to be led by the nose by politicians with no skin in the game and one day wake up and think “What happened?” without realizing we did it to ourselves.
I’m a little confused, wouldn’t this mean that there are people sitting around who seemingly prefer no job than a lower than they would like paying job?
I don’t understand how all these unemployed people are surviving.
I think what we're seeing is the large proportion of the workforce that can get by on one income rather than two doing so.
Many, many workers are working for non-economic reasons. Retired people work for exercise and social interactions. Married couples who can get by on one income no longer need to have both spouses working. And forcing students into attending classes from home has further forced more and more working couples to take a break to supervise their kids who are learning at home since most children (particularly young children) cannot be trusted to attend their classes without direct supervision. Many teenagers, also, who would have been in the workforce to have some spending money have decided the risks of the pandemic aren't worth it. And then there's the unemployment benefits. In short: Many people who can get by without working suddenly are.
It only takes a few percent of the population choosing to no longer work to create a massive labor shortage.
Food is cheap, it doesn't take a lot of work to not starve to death. Many of them can survive on odd jobs and hustles that aren't counted as employment. And many of them left their expensive city apartments and moved into friends of family's places where the entire mortgage payment is less than single room apartment rent. They severely reduced their expenses which means their pocket change turned into a sizable fund to live on.
And now if they do want to move back, rent prices have in many places doubled, so now they are demanding even higher wages to make up for it.
This is also about healthcare, which is trickle-up economics. If workers and employers alike are not concerned about paying thousands a year for premiums, that would be a double benefit that would appear as jobs.
If the US can spend billions on fossil subsidies and trillions on military and foreign wars, it should be a no brainer to stimulate domestic the economy with universal healthcare.
>If the US can spend billions on fossil subsidies and trillions on military and foreign wars, it should be a no brainer to stimulate domestic the economy with universal healthcare.
The numbers you're looking at are too small. The war on terror cost $8 trillion in 20 years.[0] That's $500 billion a year. Divide this by US population (330M) and you get $1,515. How much healthcare could you buy for that per year?
And don't forget that even without the wars a lot of this money would've been spent on modernizing the military anyway.
Universal healthcare actually saves money. It’s a mistaken assumption that conservatives always pick the cheapest or most efficient option. They pick the one that’s cheapest for people with a lot of assets. Individual insurance is paid for mostly by the middle class; universal healthcare is paid by taxes, which means rich people contribute more than they benefit.
Of course, if you want to explain why middle class conservatives support this position, it’s because the ideology of conservatism revolves around material success being equivalent to godliness. And as god’s chosen people and his representatives on earth it is their job to punish the iniquitous, therefore it is not only the privilege but also the duty of the powerful to trample on the weak. They couch this in rhetoric involving “personal responsibility” and so forth but this is what it really boils down to.
So maintaining a moral order means punishing the unworthy. This means poor people, who are assumed to be slothful, and immigrants and brown people for other reasons. They are willing to pay money to make sure that the people they have contempt for, suffer. Once you understand this all sorts of things start to make sense.
I agree. Public healthcare has a strong incentive to cure you because your health problems are a liability to the tax collecting part of the government. Meanwhile private healthcare charges you for being ill. There is no profit incentive for a cure.
I believe in actual private system there is incentive to cure people. Or they choose someone else who can fix the problem. I countries where there is public health care people choose private options because they get things done and faster.
That is a minor issue. Most public healthcare systems are not british-style NHS, and healthcare providers (doctors, hospitals) are independent of healthcare payers (public health insurance orgs) and are often private.
The main advantage of public heathcare is that being single-payer it can use its monopolistic buyer power to push prices down. It leads to lower overall costs, but also to underinvestments and lower wages in healthcare.
Everyone talks about wages, no one talks about profit sharing.
So much of our current drama would be mooted by sharing those record corporate profits with labor, by dialing back executive compensation, by returning to dividends vs buybacks (closing some more tax dodging schemes).
--
Curious to see if Labor, agriculture, small businesses, and credit unions in the USA return to their roots: Cooperatives and collectivism.
A lot of progress in governance these last 60 years. Innovations like worker-directed social enterprises and class-B corporations. New orgs using modern bylaws could be far more resilient to vulture capitalists.
There's SO MUCH work that needs doing, needs begging to be fulfilled. And yet. Wall St and SPACs can't seem to figure out how to capitalize anything smaller than a unicorn.
The real problem is inflation and excessive rent seeking.
Rents are currently at the highest level on record in the US. Hard to get someone to take a job that won't even pay the rent.
The wealth trickle up has changed into a torrent since covid, something is going to break.
Rents are that high as people are willing to pay extra for residential space. I had colleagues go from studio apartments to single family homes during the pandemic.
I am so tired of this attitude. If you don't like the conditions of a job, don't take it. But don't accuse the person offering the job of greed or whatever.
A simple example: suppose you are an old person who has trouble keeping their apartment clean as of late. Say you could offer somebody else 5$ to clean your room, because your pension is so low.
By the standards of modern activists, you have now become an evil exploiter of wage slaves.
In reality, you have created a new job. If nobody needs it, fine. If somebody needs it, great.
I don't have US TV. It sounds rather funny to me, though. The bitching about lazy people won't change anything. In contrast, bitching about greedy businesses may lead to harmful legislation.
In what way? Granted, it seems possible that welfare programs are eventually being canceled, but I thought the US doesn't have many to begin with (except for the Corona help atm)?
I know a lot of small business owners who do nothing but whine about this in my hometown. However, I think that their issue really is not offering wages as high as the competition. An old friend of mine is doing pretty well with his recently established restaurant, as he has one of the only dinners at full staff in the area. He is paying about $25 per hour, and it seems to be working quite well, as he not only has a full staff, but people are pretty motivated when paid decently.
It will work for some businesses, but not for others. I'd wager a guess that your friend's restaurant is also not a cheap option for dinner. Which is fine, but if only more expensive restaurants survive, it also means poorer people will have to cook at home more.
Depends, cheap restaurants see more traffic, especially fast food. They should be able to spread the cost of increased wages across the additional customers.
As someone who makes their living owning a food business, nearly all the food industry-related comments here are off the mark. Rather than rebut any of them, I'd say the way to think about that particular set of industry challenges is to think of them like a chronic condition.
It's never a "just do this" answer. Never. You don't tell your friend with depression to plow through this down phase he's in. And the other friend with Crohn's disease and a colostomy bag doesn't benefit from someone suggesting she try a gluten-free diet.
It's the same in the food industry. The issues at hand are complex, the ripple effects of any change are significant and multifaceted, and the foremost issue today may be superseded tomorrow while nonetheless remaining an area for concern and attention.
The better move from the outside is to provide the support that's needed today by the business (or the friend) and within your means. Can't afford to go out for food regularly? I get it, just like your job may not allow you to be available as often as your friend with Crohn's disease needs a ride home from the hospital after some procedure.
But also, unlike having a friend with a chronic disease, it is no one's obligation to support particular local businesses with their time and money. Yes, supporting local businesses in general is good, no question—but I feel like framing it as "just give the support you can to your local restaurants" implies a greater onus than can realistically be placed on regular people.
This is really a test of who will win out first: workers have to pay bills, businesses have to have workers to stay in business. Eventually the rent comes due for both, and that will force the option. I predict by Christmas people will be back to work, raises in pay or not.
Go to the top of the food chain -- put a cap on property taxes, rent and utility prices. When the cost of living is $42K a year, that doesn't leave people much room to prepare for long term living expenses let alone retirement.
That magically coincided with the a huge government program to pay people only if they decline to work? That other countries without similar programs are not seeing?
The examples they give are insane. People were paid $15/hr to not work, so of course they were demanding $20/hr to work.
This program was the most bipartisan predictably bad program ever created, and almost certainly created more economic damage than the disease.
426 comments
[ 0.19 ms ] story [ 313 ms ] threadhttps://purposefocuscommitment.medium.com/the-rice-and-the-c...
* Strongarming new user account creation even though most new users will immediately bounce.
* Removing features from the free tier to "drive conversions" to premium, whilst ruining the quality of the free tier that drew users in the first place.
* Filling the product with re-engagement nagware and notification bloat.
etc.
It's actually quite strange how VCs are trying to basically create monopolies. They are trying to find the business equivalent of real estate.
[1] https://news.ycombinator.com/item?id=28408862
It would be interesting to see what the trade off is for how much money it would take. But rationally, I think, I’d rather get $16/hour and study and take online courses for a year than make $25 and work.
https://www.wxxinews.org/post/what-unemployment-insurance-te...
https://arindube.com/2021/08/20/early-withdrawal-of-pandemic...
Per his findings, at very best the early end to ui lead to 160,000 jobs in june+july this year (6% over states that retained ui). And that’s without adding any of the complicating factors like how most of those jobs may have just been taken from new entrants to the job market. I don’t think that’s enough to explain the overall ”labour shortage” trend.
Especially when unemployment increased due to government mandated shutdowns
Do you not remember the signs saying 'support your local restaurants'? As if they are somehow entitled to money, but the people fired from those places do not.
At the very least, most of a restaurant's and a coffee shop's labor can be replaced with automated ordering, having the customer collect food themselves when it's ready, and using robots to prepare more of the food. they can do lattes with art all by themselves now.
A lot of these businesses just can't survive if they meet the wage demands of people who have benefitted from substantial stimulus over the last 2 years.
Automation would increase the quality of their service and reduce costs in the long run. I keep hearing about how much workers hate these jobs, so they should be happy to see them go away.
Edit: every example I gave above has been observed successfully in action. They just haven't been widely deployed enough to become a norm.
Other jobs that can be replaced:
- host -> seat yourself sign
- server -> pager, bus your table, ordering tablet (with just ordering, don't put ads and games like they did 5 years ago)
- barista -> robot/dispenser tech can manage several facilities simultaneously
- retail/grocery -> see what Amazon is doing
- cleaning/janitorial -> robots and more innovative cleaning apprpaches could save a lot more effort. Japan has self-cleaning public toilets.
Of course, Now that I think about it, I’ve never asked if I could just pay after ordering. The force of habit, huh!
A lot of restaurants are just cutting menus/services to be able to stay on top of demand. This strikes me as hugely economically inefficient, but whatever they don't have much choice in the matter.
People on HN like to say "just raise wages" but I don't think they like to consider what a world without affordable restaurants looks like. Maybe that is the way to go, but there should be more acknowledgement that "pay every cook like a software engineer" means there will be far fewer restaurants and far fewer people employed as cooks.
There are people who dine out 3, 4, 5 times a week, who don't really know how to cook anything beyond microwaved meals... that's completely insane!
And I think that's kind of what all of this hysteria is about. Because yeah, if the price of a burrito went up by $2-3, those people would have to learn how to cook some basic meals for themselves.
Not so long ago, dining out -- having another human being cook & bring you your food -- was a luxury, reserved for special events. This is something completely different.
I am not sure we have to be judgemental about other people's cooking skills to decide that restaurant workers deserve better pay. Everyone has some expertise, and some people choose to not learn how to cook, and that is ok.
I do feel that I can judge people for that, because other people work like dogs to cook their meals for them at below poverty wages. I'm judging, and I'm also raising the point that the current state of affairs is the absurd one. Not a possible future state of affairs where restaurants are again a luxury and people have to cook meals at home.
This guy, in his thirties and likely a brilliant engineer, just had no idea how to make himself anything, nor would he have the equipment or supplies for it. A total man-child, spoiled through and through.
I'm from Europe, and once visited Texas. I was shocked by how absurdly cheap it is to eat out. And not just the low prices, also the abundance of restaurants. We were on a highway and saw a sign "next 3 exits: food exits".
What!?
We tried a low tier option, a pizza joint. Upon entering, you pay 3$. Then it's all you can eat, as you walk past pizza slices having any topping you'd like, and you can just keep loading up. At the end, there's a soda machine with unlimited refills. And the pizza was actually pretty good.
I still just can't believe it. Does not compute. I'm not talking "thin margins", I'm talking...how the hell is this even remotely possible at all? In property, actual food cost, staff, taxes, the like? This would be 5-10 times more expensive where I live. A single glass of soda would cost more, and you'd get no refills.
At such absurd prices, I can totally imagine the culture developing where nobody cooks anymore.
An exaggeration, but you see my point perhaps. Unless your service is really purely about bang for buck, trying to automate it in ways that are visible to the customer can have downsides. McDonald’s could probably go full robotic. Starbucks? Not sure, maybe. It would be a little offputting. Your local (good) pizza place? Not likely.
Ordering on my phone while I’m the way is easier than talking with a human. And easier to add stuff on.
I’ve never considered buying an espresso machine and bypassing my local coffee place.
Similarly, I wish all fast food went cashierless. The cashier is the slowest and most error prone part of the process.
It's not like it's hard to make okay coffee, it was mainly part of me being out and about.
Rationally, we should all make coffee at home rather than spend $2-7 per day on coffee.
My point was that Starbucks can help with their labor shortage by eliminating cashiers and just having a kiosk or app.
Seems to work fine for McDonald's.
Which means "extracting free work from the customers", which is basically Marxism 101, "how to extract value from live work". My answer in such a place is to go straight out. I NEVER use the "automatic cashes", thank you very much.
> ... using robots to prepare more of the food. they can do lattes with art all by themselves now.
Robots are a sham, they're just a scarecrow to force workers into obedience. You'll replace more easily a lawyer with a robot than a toilet cleaner or a cook. Robots are fragile and horribly expensive. Good luck with that.
Just friggin' pay the people decent wages, for chrissake.
Free humans to do menial work. I think it’s pointless to try to improve wages for these low end jobs.
Similarly with fruit picking. It pays poorly and is hard and dangerous. The solution isn’t to improve wages, but to automate. Humans shouldn’t be forced to do meaningless jobs.
I was once a security guard and it’s terrible work. So boring. The pay was crap. Of course, I would have liked more pay. But I was much happier getting a different, better job, than even doubling my pay.
Automation, automation, digital transformation, sure we can do it all. But in many cases it makes things suck a bit more, and life crappier overall.
If I go to a restaurant a real person taking the order is part of the ambiance and expected service. You pay for it (maybe not in USA though).
At the last place I visited some guy dropped a tablet on the table. It said 'Next-gen Restaurant Experience' at the back. We got to fiddle a long time to type our 6-person order in. Crappy. Last time I visit there.
> retail/grocery -> see what Amazon is doing
They facilitate rat-race shopping. No more small social chat at the PoS with employees that know you. Just in and out, and back to work.
We this kind of automation every time we lose small social interactions that are important in a healthy society, imho.
Sorry, end rant/
Would be completely happy with an automated process there, for my mind that means more of my tip might go to the cook who is actually preparing my food in the first place.
>At the last place I visited some guy dropped a tablet on the table. It said 'Next-gen Restaurant Experience' at the back. We got to fiddle a long time to type our 6-person order in. Crappy. Last time I visit there.
I'm definitely okay with fiddling with a tablet if it meant I didn't have to pay a 15% tip.
>They facilitate rat-race shopping. No more small social chat at the PoS with employees that know you. Just in and out, and back to work.
The amount of "small social chat at the PoS with employees that know you" I see happening (ie. when waiting in line) is approximately zero. In that case, the loss is zero.
Although in the end the waiter might be necessary from a customer support and questions perspective tbh. I did an ordering app thing in a restaurant and we still talked to the 'bus boy' to ask questions in the end.
There is so much inefficiency about your typical restaurant visit just begging to be optimized out. Restaurants win, too, because they can accommodate more customers per hour.
I tend to just not go to sit-down restaurants because they always manage to turn a 30 minute eating session into a 90 minute wait-fest.
The last place I went to like that, the owner was working probably due to lack of staff.
He was wearing a Rolex Explorer II.
Waited service is okay for special dates and business meals or something.
I recently went to a place that had no welcome/front end staff, just workers making a product (desserts) and a two kiosks at the front to take your order.
The kiosks interface was poorly made and confusing for a first time person. Worse, there was no sign telling me to step forward and order using the computer nor was there any sort of line to know who had already ordered and who were waiting to order. Over all it was a terrible experience and as such I don't plan on going back.
If restaurants do it poorly that is of course an issue, but it's not like rude servers and bad service don't exist.
Also those kind of seat yourself / serve yourself places exist, they're called fast food typically. Look at mcdonalds, chipotle or subway for example. That setup is actually very old, from the time before computers.
Places that serve alcohol like waiters although, because they are essentially alcohol salesmen that boost sales, and alcohol are big profit drivers for restaurants.
If going to a coffee shop meant going to some sort of self service machine, pushing a few button and getting a machine made Nespresso pod coffee I'd just stay at home and save the money....
What's the end goal of all this ? Automate everything, skip all human interactions, destroy every small restaurants/coffee shops ?
This "automate everything" attitude is so weird, almost like some people want to dehumanise humanity. You know what would be the absolute automation, providing the best experience for everyone, for the least amount of energy spent ? Being in a coma in some form of pod, fed artificial thoughts and food/oxygen through tubes.
Automation only make sense if it delivers us from work, not if it pushes people into worse positions.
https://m.youtube.com/watch?v=G2iAGuRvN1w
As far as humanity is concerned, perhaps it is uniquely human to bitch about low paid service jobs (even when they aren't all that low pay) while also bitching about those jobs no longer being necessary. If the labor I interacted with regularly took their jobs seriously and had good customer service skills, I wouldn't be so quick to cut them out of the picture. Unfortunately my experience is that at least in the US, the culture of work varies wildly by region, and most of them aren't all that good for the consumer.
Labour costs are, in many cases, really small; the capital and running costs of automation could well be comparable already.
> - server -> pager, bus your table, ordering tablet
> .... They just haven't been widely deployed enough to become a norm.
Attempts to revive the Automat (a century-old concept along those lines) haven't gone so well in the US. https://en.wikipedia.org/wiki/Automat
FEBO does this in the Netherland. https://en.wikipedia.org/wiki/FEBO , though also with in-person ordering.
> observed successfully in action
And failed in action.
Government handouts are the one thing that has changed for those folks.
Do you count an eviction moratorium as a handout?
Incidentally you can look up what businesses have taken in loans.[1]
[1] https://www.federalpay.org/paycheck-protection-program/
edit to add- a lot of business owners including my own father took the max possible even though he didn't need it one bit, as not doing so was 'leaving money on the table'
There has always been a balance between monitary compensation and other compensation, like being treated well, or having fewer work hours, etc. Everyone weighs these differently, but a small shift in the average weights can have a large impact. Perhaps on average people are valuing good working conditions more. Or have decided they'd rather do without some luxuries in exchange for avoiding certain types of jobs.
If your company has trouble hiring, it's a signal that something is wrong with the hiring process and the company needs to change it. Maybe stop leetcode nonsense, maybe offer more equity. Your managers should spend time to figure out the root cause and fix the problem. If your management cannot figure it out, fire them first.
If your company has trouble retaining engineers, it's a signal that something is wrong with the work environment. It could be pay. It could be lack of promotions. It could be a lack of recognition for the amount of work they are putting in. Once again, it is the management's job to figure out the root cause and fix it. If they can't, fire your management first. Hire/promote people who can do something different.
It is quite clear that in a hot economy, a lot of employers will need to reevaluate if they have the right decision makers in the first place.
This is also the reason why the best leverage for engineers is to switch regularly.
Why wait for the company to take action when management shows no interest or is not incentivized to promote their own team?
I went to the grocery store a couple of days ago. They one register and a bank of self-checkout open at 5 PM. The lines were 20 carts deep.
My daughters school is doing rotating classroom closings, not because of covid but because they can’t hire teachers.
My Amazon shipments have ballooned from 1-2 to 5 days.
These are just some personal stories. We haven’t talked about global supply chain issues, container gluts, price inflation, food shortages, etc.
This is a level of dysfunction I have not seen in my 37 years on earth.
The horror
What's laughable is the absolute privilege of treating the worker class like the slaves they are and demanding they take what is offered.
Coincidentally the income inequality is the highest ever as well- but of course that couldn't be part of the problem.
Bearing in mind it's only really the last generation or so in the UK who have gotten used to not expecting things like double pay for a night shift, workers expecting to be paid about £10p/h for a bar shift finishing at 4am still isn't a bad deal at all
My hypothesis is that a bunch of people in low-paid service jobs like this had their jobs cut under them by the pandemic and were forced to find alternative income streams. That was painful at the time, but now many of those people find themselves in a much stronger position to refuse the work.
The blue collar labor market is just a magnificent joke. I tried it for about 7 years of my life and they will literally only employ you if they somehow know you or you know someone else. If you're just a stranger, they won't even look at your resume. They don't even want to train on shit that in the 1960-1990's, they would take you if you weren't a total moron and could pass a drug test (if that even).
Modern HR has become a joke in this situation as well. Not only do they pretend like they add value to a company, but they filter out people who could easily be exploited for cheap simply because they don't have experience. Seriously, just hire a rando who seems vetted, make them do some bitch work and occasionally the main job duties. If they catch on, give them more, if not, get rid of them. It's like employers have become more risk averse than someone investing in CD's...
I don't understand it, that you'd either
a) be willing to drive your business into the ground serving a limited menu because you won't hire a couple cooks at $20 an hour, or
b) have a business so close to the brink of shutting down that an additional $20-50 an hour will shutter you.
He chose option A I guess...
“Have you tried offering more?” “That’s too much for cosmetology work.”
Getting slapped by the invisible hand of the market.
And to that I say: welcome to the club.
We have this bipartisan love affair with small business, and the fact is many of them are unproductive institutions abusing tons of poor immigrants to stay afloat. They also provide ideological cover for the more labor-intensive actual big corps. It's about time the rose-collard glasses came off.
glasses made of red cabbage? :)
(Rose-coloured, looking through them makes everything look rosy (cheerful, promising, pleasant))
Now a haircut is $50 and I no longer go, opting instead to cut my own hair w help from my girlfriend.
Maybe people don’t want $50 haircuts.
Automobiles replaced horses, did I miss the memo on something replacing hair growth?
Men have been giving it a shot for a while, but unfortunately being half bald hasn't yet resulted in commensurate reductions in haircut prices compared to other men. It seems like there's a business opportunity there for a business model based on prices weighted by hair quantity.
Horses and barns still exist as a luxury, and that could be the fate of fancy cuts too.
All we're seeing is a population struggling to accept their dollar is rather suddenly worth much less, there's a significant latency to such things sinking in. It can even be generational, some people never learn.
Case in point: When I bought some land in 2018 I paid the asking price, which I thought was perfectly reasonable vs. FMV. When some neighbors came by and welcomed me to the neighborhood, they asked what I paid. When I told them they were shocked and said I overpayed by a lot. This was in 2018, pre-pandemic prices, and the neighbors were an elderly couple who had once owned multiple properties on the block. Their perception of FMV was completely out of touch with reality, and just months later nearby properties similar to mine were selling for 20-50% more than I had paid, still pre-pandemic. Now that the pandemic has completely shocked everything from increasing demand for rural property accessible to city centers, to printing what, trillions of dollars? My place would sell for over double what I paid in 2018, and my elderly neighbors would still be believing it's worth less USD than I paid in 2018, if they were still alive.
Sure, just as is their demand for horses.
> All we're seeing is a population struggling to accept their dollar is rather suddenly worth much less, there's a significant latency to such things sinking in. It can even be generational, some people never learn.
https://twitter.com/JWMason1/status/1426245765437952010 it's far from universal across prices. The fact we where so much about prices and not about wages indicates a big bias in which these yeomen-presenting small businesses control the narrative.
I don't own a car, I don't pay for gas. I haven't noticed anything out of the ordinary, even with haircuts. If my haircut price did go up, and the barber's wage did too. I do not resent it.
I've definitely noticed prices going up, but have been mostly dismissive of it as either being pathologically pandemic-caused and likely temporary (lumber prices for instance, I happened to be building a new roof throughout the pandemic) or opportunistic vendors not wanting to let a good crisis go to waste and gouging in the fog of the pandemic (a local organics market abruptly increased orange prices 300%/lb a few months ago, without even updating the displayed price).
And you can already find numerous news articles documenting cases of "shrinkflation" in staples like cereals [0], which is just a sneaky way of raising prices. I haven't personally noticed this since I don't consume such goods, but that doesn't mean it isn't happening.
My assumption is cost of services rendered by small businesses will be more variable and laggy in responding to the reality. Some will delay increasing prices, some will aggressively do so while the pandemic scapegoat is still fresh, some will just close their doors. When it comes to cases delaying price increases, they'll no doubt be exploring all avenues like cutting staff/hours/wages to eat the difference. The problem is, those cases dragging their feet on raising prices, their mentality likely reflects the mentality of their clientele/community. It's a collective of people operating in denial that shit's getting expensive, and yes, your $50 gets you a haircut, go ask for a raise, USD is inflationary.
[0] https://www.npr.org/sections/money/2021/07/06/1012409112/bew...
Are you saying that you see the lack of correlation of the prices in the chart not as evidence inflation is over hyped, but as evidence of an inflation that is still working it's way through the supply chains?
The economics and behaviors may change, but the need won't go away.
If Khrushchyovkas are ugly but efficient apartments, then let's call the hair style a "Khru cut" hee hee hee.
They just bumped the price by 5 bucks and dispensed with the pricing trickery by paying proper wages.
And I'm not trying to be dismissive at all. Coming from Europe I also thought initially that tipping was really weird, but after living with it for a decade+ I got used to it and I'm really curious as to why we should stop doing it.
Also covid and those ipad paying terminals have turned every job into a tip job. Every cashier wants a tip now. And they ask you if you want to tip becasue no one can touch the terminals. Which is awkward to say no to. I see/hear people leaving ridiculous tips for take out. I had one terminal for take out not have a "no tip" option. I had to manually type in $0.
It undermines the norm that businesses should pay their damn taxes.
To wit, we have been able to put off discussing the non-profitability of restaurants for far too long until now. Remember, it is quite arguable that Baumol's cost disease = "progress", not by definition, but by bi-implication.
Tips are income already, and are taxed as such. You can get away with not reporting it if it's a few extra bucks from a jar on a counter. But if you're a "tipped employee" (and thus eligible to be paid sub-minimum wage) you report them to your employer, who then reports them to the IRS, and does tax withholding same as for wages.
I'm not following your point. Since some people cheat on their taxes, they shouldn't be paid wages instead, because then they wouldn't be able to underreport as easily?
> Since some people cheat on their taxes, they shouldn't be paid wages instead, because then they wouldn't be able to underreport as easily?
How did you get this from what I said? I said nothing to that effect. Not even close. My point was very simple.
The correlation between "great service" and getting a good tip is nowhere near a 1:1. It sucks to go to work and not know whether you're going to come home with enough money to pay your bills this week, because you might get lucky or you might get a stream of tightwads.
I'd be OK with tipping if people made a baseline living wage and the tips were for service above and beyond the usual. I'm not OK with the current standard.
If you can't be persuaded that it's unfair to the workers, realize it's also unfair to you as a customer. Because people can't be reliably counted upon to tip their fair share, you need to over-tip if you care about people making a fair wage.
And the perception of a "fair" tip has gone up noticeably in my lifetime -- 10-15% used to be a reasonable tip when I was in my teens and early 20s. Now it's crept up to 15-20% and spread to a lot of jobs that you didn't think of for tips (e.g., somebody handing you a coffee) because wages suck.
A couple days ago I had my oil changed at once of those drive-through places and the payment terminal had a prompt for a tip.
...And, importantly, there's no way to actually know this because it's all informal.
I keep hearing that some places are now expecting 25% tips, while others are still repeating the older 15-20% figure. Some transportation workers (cab drivers, hotel courtesy van drivers) expect tips—others, in exactly the same job but a different company, don't expect them or even refuse them.
The informality of it all is one of the biggest reasons why tipping culture needs to die, and be replaced with actually paying workers a fair amount to start with.
As a customer, I want to know the real costs ahead of time.
As an employee (last received tips some 30 years ago, but still…) I would like to get paid for the work I did, not that 50% of my pay would be contingent on how authentic I can make my fake smile look on a stressful day.
I usually tip 20% wherever I am because I am too lazy to figure out the local culture and because I can afford to; but I seriously hate it.
Visiting Germany 15 years ago was a bliss in this respect - the expectation was to round up to the nearest euro, if any tip at all. But I understand that now, at least in Berlin, 10%-20% tip has become the norm.
The house gets a percentage per head. You're really tipping.
I've just impoverished one barista at Starbucks because today I went to Cafe Nero instead! And I'm no longer a regular at my local Italian joint, so I've just deprived a few more people of an income.
For some reason you think this is about sticking it to the man but it's not. The staff get a stable, living wage and the business is charging prices much more in line with reality. I'm also no longer personally liable for the income of whoever served me, because the rightful responsibility for that lies on the employer.
As an individual customer, not likely since line workers' pay does not directly depend on the number of customers served (at least until it's so low that the business goes under and they have to move to unemployment benefits instead). Tips depend on each customer though, so if you chose Starbucks over Cafe Nero, and Starbucks barristas don't get tips, but Cafe Nero's ones customarily do, then yes, your choice had influence on the income of Cafe Nero's barrista. Probably a small one, but it's there. If neither barrista gets tips (I've never seen anybody to tip a Starbucks barrista but in smaller shops it happens sometimes, though much less frequent than with waiters) then there's not much difference from a single individual action.
$50 or look like I've got the mange? I'll pay the $50!
If your girlfriend can do it for you, that's worth a lot more than the money saved. So in my view once you have established that your girlfriend can do it, that is the better choice regardless of price.
So it's not even an economic argument, "If I pay that I'll go out of business"? It's just a moral one, "They don't deserve that amount of money"?
I can't say I'm surprised, TBH.
But a reluctance to change prices at an existing business does not mean we won't get changed prices.
It's a denial/delayed acceptance of inflation/cost-of-living increases.
These people are struggling to accept that money is worth sufficiently less than it was before to make the status quo untenable.
Or if they have accepted it, they're determined to make the underlings eat the loss.
If all the cooks, servers, cosmetologists, janitors, lawn care / landscaping, delivery drivers, warehouse workers and so forth stopped doing their jobs... everything would suck real quickly. But somehow we're not willing to pay them a living wage.
That’s the idea behind a general strike I believe, but coordination is hard (and figuring out a set of demands that is effective long term may be harder).
/me once stayed in Athens during a garbage collectors’ strike; didn’t suck as much as you’d think, but was undeniably spectacular
I think you're mixing jobs together that really aren't of similar importance. If all the restaurants shut down, nothing much happens. People buy food at the super market for lunch and dinner. If all the landscaping crews stop working, you'll get more natural growth and some trees will at some point reach into the street / path and become annoying. If the cosmetologists go on strike, you get some annoyed women who need to fill their afternoon time with another activity.
If ware house workers, delivery drivers or garbage collectors strike, shit goes south pretty quickly. I've lived in a major Northern European city during a garbage collector strike, and it was silly to look at because it was pretty obvious who'd win when the trash bags started spilling into the road after people kept piling them up.
I'm not sure why people think that a barber is somehow able to compete with the infinite resources of the government hellbent on idling labor capacity. Very few rational people will work for 25/hour if they can sit and watch TV for 20/hour. Saying "pay more" is not helpful in that situation. The labor pool is basically limited to those who have enough foresight to realize the gravy train might end.
I have seen software companies making a similar mistake. Of course, the salaries there are way above the minimum wage, but still the same logic. They complain: "We wanted to start this new project, but we can't find developers; we have been posting job announcements online for five years already!" I look at the job announcement, it offers about 2/3 of the market salary. "Have you tried offering more?" Blank stares. I guess, how could that possibly be relevant?
Maybe the problem is that the employers see employees as "the ones who obey", which is generally true... except for the job interviews. There, you cannot simply give orders and expect them to be obeyed. The candidate will only take the offer if they like the proposed deal. Also, for the ones who accept, you can gradually make the deal worse, by increasing the workload and keeping salary the same regardless of inflation... until the surprising moment when the employee decides to walk away, because they got a better deal somewhere else.
Labor is the highest cost for a restaurant (higher than rent) so bumping wages from $15 to $20 may not be possible if you can’t also raise prices by 30%.
This may be hard to understand for us rich programmers. But it’s quite simple for companies that have really stiff price competition.
Try bumping up the wages and advertising the fact that you do pay a living wage, that might have some impact. My fiance and I try to choose restaurants that are locally owned and are known to treat staff well. (We have friends in food service, locally. Word gets around.) I doubt we're unique in this.
It does depend a lot on location and other factors - you're going to find more people willing to spend more in some areas than others. Other people are perfectly happy to go to restaurant X knowing they fuck over workers but have the cheapest menu.
There's also a lot of... this is how much it costs for me to make, so I should charge a little bit more. Where I think it should be... this is how much it would cost my customers to make in groceries and time.
When I eat out I almost only get food that is too inconvenient to make at home. I don't get spaghetti at the Italian restaurant, I get lasagna or stuffed shells or something that would take me hours of work at home. Yet, for a restaurant these are fairly easy items to cook because the time is less of a problem and are in many ways simpler for them to prepare because they are cooked ahead of time and reheated when ordered.
So for the restaurant, it makes sense to price a big plate of lasagna the same or lower than a plate of pasta they have to do more work on to serve. But to me the lasagna is worth more because it would take me at least 2-3 hours to make. So the restaurant sees it as a cheap thing while I see it as a valuable thing.
Your competitors would love it if you set your prices like that.
But I do think that they're subject to the pressure to under-price what they produce because to them it's easier. It's easy to discount your own labor when you think the job is easy.
Usually that perception of whether the job is easy is wrong.
In any case, I can't imagine a small restaurant having any way to seriously or accurately measure what their prices should be better than maybe a dollar. There's just not enough business to tell, and if you hit a bad region the place shuts down.
You can try setting it based off nearby businesses, but even then it's probably not better than a dollar of correct.
Why do you think companies don’t just raise prices by $1, since jimmaswell won’t even notice it or care?
I’ve never heard that increasing minimum wage will be the end of small business, I’ve just heard that it will be incrementally harder to put those wages and number of jobs at the low end of the wage increase will go down. (And that’s what happens) Again, that’s a supply and demand thing.
Are you arguing that prices don’t have an impact on purchases? Again, how do you explain companies just increasing prices arbitrarily? What do you think stops them from doing this?
I'm not sure what their reasons are for raising their prices so much compared to 5-6 years ago, but it will probably be a long time before we go back, the prices are just too high compared to other options.
Likewise with items moving on/off the dollar menu at fast food places.
If there are 4 people in your family, that's an extra $4 at least, which is ~30 minutes of minimum wage, or about 1.25% of a week's pay before taxes. I'm not going to try to guess what portion of that hypothetical family's income is expendable, but if it's 1.25% of their total weekly earnings then it's probably a much higher percentage of their weekly disposable income.
If you've got $40 a week left over as disposable income, an extra $4 starts to seem like a lot more. In an economy where most people can't cover a surprise $200 bill, $4 means something to a lot of people.
So a 33% change in labor increases prices quite a bit. And if everyone increases labor costs, then that drives up food and other materials.
So you will easily see price increases of 15-25%. If my local Mexican restaurant increases prices by that much, I and many other customers will not go as much.
This is super simple Econ101 stuff. Your example is flawed as there’s more than just cooks and there’s not a profit of $1/item.
> a National Restaurant Association publication that said the average restaurant runs about a 29.9 percent labor cost without taxes, benefits and insurance, and about 34 percent with taxes,
So your 40% number is way off. Also hourly rate doesn't effect other labor costs
You know society is doomed when a wage supporting a middle class lifestyle is deemed "rich".
I think the root problem is that most restaurant dining experiences are not worth the $30+ per person for enough people compared to cooking and eating at home.
I would like to see more places where you order at a register and bus your own food with minimal overheard and maximum investment in the quality of the food rather than the whole waiter and ambiance schtick.
Somehow they managed to not raise their prices, or raise it insignificantly enough to where I didn't notice it (50 cents across the board maybe?).
For sit-down places, I frequently see price hikes of 20-30% since early 2020 and mandatory gratuity for parties of 4 now, which is frankly ridiculous, because the food quality stayed the same or has gotten worse. Not to mention that the whole experience of sharing an indoor space with an unknown demographic is dubious at best.
This is currently a cultural non-starter except for niche markets, but once an economic crisis of sufficiently large and long duration is established, that model might work. Maybe. Look up any number of formerly-wealthy-now-poor nations, and I'm hard-pressed to recall any that adopted this model in the mainstream restaurant industry in that nation. Human culture changes are slow to arrive, and carry immense inertia.
I suspect the hyper-rationalization of markets is leading to continuous spectrum K-selection strategies that ultimately prove adverse to the overall market. All the monetization optimization (aided by the gradual incremental gains our industry delivers, however somnambulantly) is attaching a price to every factor that is priced, but under-pricing all non-priced factors (generally those on a long timeline like sustained incentives for young families to support future demographics, pollution, energy, etc.).
This optimization is blunted by currently-stronger cultural norms, especially those tangential or central to mating. It remains to be seen which force remains stronger over the long run (my personal bet is on the cultural norms).
Having said all that, I wouldn't mind at all patronizing a "meal plan" model-based co-op that lets me select 2-4 months in advance how many breakfast/lunch/dinner/brunch I want for a month, in a setting like you describe, a 1-3 minute walk from where I live, with online seating reservations, that operates 24x7x365, serving the locality's "home style" cuisine plus lots of greens. The business only lets in a dynamically-selected number of walk-ins, based upon seating availability and ML-projected food waste at that moment. The value proposition is trade off the customer-skin-in-the-game, fixed commitments for fresh ingredients freshly-prepared at near-home-prepared prices, with aggressively-amortized costs of running the co-op and its costs, thus able to pay fair wages for bare bones staff.
But I would be very surprised if there are enough potential customers like me in sufficient densities in even major metropolitan urban cores to make such a model feasible.
Honestly I feel like most people would pay it. It seems to me that everybody just accepts you pay like 10x the price of what you could make something yourself as reasonable. I don't get it and it irks me that we even need to participate in this facade that we're all some sort of royalty class that are entitled this.
Personal service might be more expensive overall, but I’m not ready to immediately declare that obvious just because the people behind it are visible to the buyer.
Almost bent my steering wheel in rage....
And everybody’s prices are sticky, it’s seemingly part of how we define fairness. (See the haircut comment two levels up for an example from the consumer side.) I’m certain economists have loads and loads of strong words to say to all of us about this behaviour.
This is the default state of businesses in competitive markets. If you could do with less then you could charge less, and one of your competitors will start doing that to take your customers, so you have to do the same.
Of course, the alternative is to pay more and then raise prices. Which you might not be able to do if the additional cost is imposed only on you, but when your competitors have to pay it too, you all raise prices without losing business to each other.
But the overall industry would still lose some business to customers not being able to afford its products, and some of the suppliers still go out of business.
Unless the labor costs increase generally instead of only for that industry. Because then your customers can afford the higher prices. If labor becomes a higher percentage of operating costs overall, they may even be able to afford more than before. This is why a UBI is good for businesses -- customers have more money in their pockets.
We should be careful not to make wage depression some sort of abstract "logical" natural state. Wages are low for a reason and active effort has to be expended to keep them as they are.
All of that said, what you could reasonably hope would happen is that all businesses raise their prices because of the labor shortage (already happening around me), but then you have another problem which is that the increased wages are offset by the increased prices.
At the current click, all that's going to be left are the corporations with enough wiggle room to absorb the increase, but they will also pass on prices. I would just prefer not to live in that world. I think corporations increase inequity (Walmart could pay a living wage and full health care, but doesn't) and small business puts the power back with the individual.
We ask, why don't workers go on general strikes? Well small businesses refusing to even try raising wages and prices amounts to a capital general strike.
Employers and employees simply have radically different market power, and that is as fundamental a fact in all economies remotely like ours as any econ 101 supply and demand.
The thing is, a lot more people are like my gf than me (I grew up middle-upper class and am 'financially' well upper class for my country).
Except businesses then raise their prices to cover the increased wages so the "more money" is almost instantly eaten away by having to pay those increased prices. You can't get something for nothing.
Or a lower quality products, because what you'd do if I slack off, fire me? No problem, I'll live off UBI for a while, then go to somebody who didn't fire me yet, there are a lot of places around.
> may attracts better talent
A lot of minimum-wage positions won't benefit from better talent - once minimal level of competency is reached, it's enough. Surely, a waiter could be a rockstar, probably - but most people, and most businesses, expect just not forgetting the orders, not dropping the food on the floor and not cursing out the customers, once it's there, there's not much monetary upside for the business from the better talent (of course, there are tips but that's different story).
> given that they become a significant expense.
Payrolls are already a very significant expense, especially in restaurant, etc. business. I don't think making them more expensive would change much.
These would be far less of a burden than the implied taxes arising due to existing means-tested welfare. The incentive distorting effect from that sort of means-testing is extremely high, and the whole point of the UBI/NIT is to dispense with that.
We know there are aggregate demand issues, and we now know that simply issuing more credit "the normal way" seems to cause asset bubbles before boosting demand for labor, so we should be open to trying other things even if we don't know exactly what will happen.
Or read Kaleki in 1943 https://delong.typepad.com/kalecki43.pdf, who predicted all of this (UBI resistance, direct gov investment resistance, The keynesian collapse in the 1970s, trying to boost employment by boosting private investment alone not working....). Incredible and saddening.
That is is just plain corruption. Leaders (whether in governments or businesses) would rather have power for themselves than well-being for the country. Honestly, I had a hunch that developed nations didn't have less corruption, rather, the impact of corruption has been softened. Each individual industry leader might be corrupt but given enough competing industries their power diminishes. This is why government corruption is primarily associated with oil countries (or other resources) because controlling that single industry is the same as controlling the entire country.
You can clearly see it in Germany as well. Merkel and her party have close connections with specific industries commonly associated with Germany, the most prominent examples are car manufacturing because it is an export industry and the coal industry because Germany is resource poor (coal is all we have). If you work at VW CDU is the party you vote for...
If you own a business and extract as much profits as possible --- not corruption. If you own a business and install your kid as middle manager to extract more money to your family -- corruption!
There's a quip that corruption is a term to penalize regions with larger extended families and kinship groups --- because the most galling corruption to the west is helping that 3rd cousin or clan member or whatever. But that is a real cop-out when in the west few know their 3rd cousin or are in a clan --- easy avoid nepotism when you don't know of the person!
Right now the government pays benefits that are already close to what a UBI would pay, but in food/education/housing/other assistance. Then those benefits aggressively phase out.
The phase outs are crazy. First, they invert what you want from a progressive tax system, because lower income people are paying the highest marginal rates. You might be paying a "10% tax rate" but if you're also losing $0.50 of every dollar to benefits phase outs, your marginal rate in practice is 60%.
Worse, because the benefits phase outs are individual to every program, they overlap randomly to nonsensical effect. Someone making $20,000 might have a marginal rate of 80%, at $24,000 it's 110%, at $28,000 it's down to 40% but at $30,000 its back up to 60%. This is obviously very stupid and creates bad incentives.
Now suppose we align all the phase outs so that a) the phase out rate is uniform across all programs and b) we don't have lower income people paying higher marginal rates than higher income people.
Then you might have something this. Everyone pays a 10% tax rate from $0 to $60,000 and a 30% tax rate after, and benefits phase out at a rate of 20% from $0 to $60,000 and are fully phased out by $60,000.
Well, it turns out this is mathematically equivalent to paying the benefits to everyone unconditionally and having a flat 30% tax rate starting from $0. And if you convert all the benefits to cash instead of food vouchers and such then you have a UBI.
On paper eliminating the phase outs costs a ton of money -- everyone making $60,000 would have to pay $12,000 more in taxes! But then they all receive a $12,000 UBI and it just cancels out.
The primary transfer effect is really in not having such aggressive phase outs, i.e. not putting such high marginal rates on lower income people. The effect is that they have more money, and higher income people have to pay higher taxes to pay for it. But not by the full amount of the UBI, only by the difference between the status quo of aggressive phase outs and the less aggressive ones that make the marginal rate curve not so silly. You end up with a modest transfer from higher income people to lower income people, vs. the status quo.
And then, because lower income people are more likely to spend what they receive than higher income people, you get more consumer demand, which is good for businesses.
You also have a greater incentive to work for lower income people, because they get to keep 70% of what they earn instead of 40% (or -10%).
Lots of the nonsensical stuff is not exactly random.
Still the finances could be balanced like this and you could end up with an equal number of recipients receiving the same average benefit. Perhaps some efficiency through consolidation.
There is serious consensus that this amount has not been enough for a while which is one of the things that sparks the discussion about UBI more often.
Walmart & McDonalds might presently be employing the most noticable share of present recipients, but that is far from universal. Yet.
Just like with health care, to get anywhere near universal you're going to have to tax something having deeper pockets than mere income no matter how many of the top wage-earners get high brackets and have loopholes closed.
You're going to have to tax commerce.
If that could be done plus phase out the income levies, that would be the best thing for a consumer economy in over 100 years.
The flip curse of the curse of high dimensionality is that adjusting interest rates or UBI has so wide and rich a space of possible effects, good or bad. We really need to try these things before jumping to conclusions.
Ask the Swiss or Danes. Cooks can have a living wage, but fancy meals are comparatively much more expensive than their equivalents in the US, given their lack access to underpaid immigrants for that kind of work.
Thankfully we progressed out of those dark times and we are empowered today to enjoy the bounty of rice, factory farmed meat, salt and sugar slapped together by strangers on minimum wage.
Yup, that's called a subsistence economy. It's a very good thing that we can spend our time doing something better than back-breaking agricultural work and general housekeeping. That's what progress is all about.
Alexis de Tocqueville, 1861, cited in https://www.independent.org/pdf/tir/tir_12_02_01_choi.pdf
That the French (still) have access to good meals (not sure what you have in mind specifically) might have quite a bit to do with a history of small scale farming. That and a climate conducive to small scale farming. It remains to be seen how long this will last. The forces of globalization are rapidly eroding local culture everywhere around the world.
We have the results to show for it:
> In the 1960s and 1970s only 13 percent of U.S. adults and 5 to 7 percent of U.S. children were obese.
> The US obesity prevalence was 42.4% in 2017 – 2018.
> For children and adolescents aged 2-19 years in 2017-20181 the prevalence of obesity was 19.3%.
https://www.apa.org/pi/families/resources/newsletter/2012/07...
https://www.cdc.gov/obesity/data/adult.html
https://www.cdc.gov/obesity/data/childhood.html
Depending on how you do the math that's an even less-than-subsistence level.
Especially when it was such a prosperous nation merely 60 years ago, in spite of productivity being statistically much lower then.
Not a good deal IMO.
Where did I say that? But now that you brought it up... the problem isnt from competition, but from the paradigm shift that prevents low skill labor from supporting themselves (or trying). There is a lot of debate about how mass automation will affect macroeconomics and labor.
A lot of well-credentialed people will say "bu- but the 1970s", but the fact of the matter is the wage share of income could also change, and rather than knee-capping unions to control inflation, we could have done price controls (as was done in the 1950s), profit controls (which would limit dividends and buy backs, not reinvestment to boost supply) or other such things.
I really think that some of this is about class solidarity among business owners (especially small business owners). I say this as a political centrist, too.
There are a bunch of reasons why wages are "sticky" (i.e. they don't go up--or down--when you'd expect that to be the rational decision in an efficient market), and this is probably one of them.
Also, there are ways to seek out higher efficiency. Hire at higher wage but expect and prepare for higher productivity. Operate the business for longer hours to make the most of money paid for rent, etc. Unfortunately, I think small businesses where I live (in southeast Virginia) are much worse at this than larger businesses.
I'm a proponent of UBI and I think this claim needs a citation for the level of certainty that you expressed. I have always viewed that UBI will likely be bad for small businesses, but that by the time that we need UBI there won't be many small businesses left.
There are two pilots of UBI worth paying attention to: Finland and Ontario. Finland proposes paying the unemployed (this differs slightly from unemployment benefits in the US) while Ontario proposes paying anyone below the poverty line.
Source: https://hiring.workopolis.com/article/universal-basic-income...
UBI-like concepts, like what was implemented by the US and other countries during COVID, do help recover us from a recession.
Source: https://www.businessnewsdaily.com/9649-universal-basic-incom...
That said, it was not enough to impact small businesses in a positive way. Over 50% of small businesses reported having a large negative impact. There's lots of questions to be answered there, like the availability of non-extractive technology for small businesses to use to compete, and where the income levels where UBI-like income disbursements were centered actually spend their money.
> Estimates from the weekly U.S. Census Small Business Pulse Survey indicate that roughly 50% of businesses report having a large negative effect from the COVID‐19 pandemic and that only 15%–20% of businesses have enough cash on hand to cover 3 months of operations (Bohn, Mejia, & Lafortune, 2020; U.S. Census Bureau, 2020).
Source: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7461311/
Neither of these is a UBI. Paying only people who are unemployed is in particular quite the opposite of what you want, because it discourages people from taking a job since they'll lose the money. Moreover, you need more of the middle class to be receiving some of the money (they'll pay some but not all of it back in taxes), because that's what increases consumer demand.
They're considered quasi-UBI: https://en.wikipedia.org/wiki/Universal_basic_income#Quasi-U...
I do agree there are better implementations to be had, and that the implementation probably makes all the difference in outcomes. That said, I wouldn't say they're expressly not UBI.
I also just learned about this: https://en.wikipedia.org/wiki/Universal_basic_income#Alaska_...
Google claims under 9,000 results for quasi UBI. Some use it to highlight how actual UBI would be better. Some use it to describe programs like basic income for everyone in rural regions. Not expanded unemployment benefits.
I also didn't say it can't, but I think the choice to make it optimal for SMB's, middle class, and upper middle class is an intentional one. I don't think that'll happen just by doing UBI. Hence I said, if you think it will then citation needed.
A: "Newer designs are safer."
B: "There is no evidence of that because they haven't been built yet."
A: "We're talking about the design here. You can see that it has these passive safety features which..."
B: "But there is no evidence of that because they haven't been built yet."
A: "Okay, then let's build them so that we can see the evidence."
B: "No, we can't build them because there is no evidence that it works."
UBI is purely theoretical. It does not exist anywhere on the planet in the form you're describing.
The US has engaged in UBI-like systems for quite a while, as have other countries.
UBI ascribes that everyone must get the benefit in order for the effects to be felt.
COVID incurred UBI-like payments, how these were used is worth studying, but they don't prove or disprove UBI. They certainly didn't improve the situation for small businesses, which is my point - if it takes a holistic UBI system to prove UBI and you're unwilling to figure out how to decompose it, then we'll never get it, and we're all doomed. That to me seems rather silly.
It is not a given that UBI will be a boon for businesses (big or small). Personally, I do think it will benefit large corporations, but it remains to be seen how small and medium businesses will fare -- and I think that largely depends on implementation details that need to be discovered. That much needs to be proven.
In order to prove some of the claims of UBI, countries are doing experiments and looking at specific effects that their implementations have in order to gauge UBI. Nobody is going to look a the monumental cost of UBI and fire a hope-driven-missile in terms of policy and economic risk, which is absolutely understandable. Finland and Ontario are putting out some tests, the inference they draw will largely depend on the questions they set out to answer. This is probably also informing them on how they could roll out UBI progressively.
What I was contesting was the absoluteness of this statement:
> This is why a UBI is good for businesses -- customers have more money in their pockets.
Nothing says that because people have money that they will spend it, much less where you want them to spend it. That has to be incentivized and we have to experiment with how to incentivize it.
(And yes, the lower-middle class will probably still be net UBI recipients if only barely, because this helps with smoothing out incentives at the lower end. You don't want to have a sudden benefit cliff, or else a breakeven point that's infeasibly high.)
Right now companies must make $X per employee per hour. If their business cannot do that it’s deemed that it’s not productive enough and should not exist.
Since they re-printed the menus anyways to add the footnote, they could have simply been more transparent and increased each menu item's cost. Most people regularly dining at fancy ocean-view restaurants (which I rarely frequent) can afford the higher cost.
We have a 3 tier system: minimum wage workers condemned to a perpetual state of precarity, middle class professional and small business types that toil away paying hefty mortgages one medical emergency from bankruptcy and capital owners that lend around money at extortionate rates and run to the nanny state to print money and save their skin whenever their bets go sour. Guess which strata gets most of the flak. Tip: it's not those at the top.
Your heart is in the right place, but you are doing the devil's work by accident. "extortionate rates" and "printing money" do not happen at once! We have low interest rates, which are good for debtors. The banks now will get very little interest on those mortgages, so that can't be the sole piece of they are making a killing.
What also happens is low interest loans allow the value of land to go up, and land speculation works too well. Worse, there are laws and other things preventing density so the desire to have as many tenants as possible doesn't actually reduce the cost of floor area.
The problem isn't the stimulus although there are alternative proposals to reduce the amount of government intervention. Land is simply unique in the fact that it is already there and private land ownership is merely the right to exclude people from the land. There simply isn't any good argument for why money earned off the land itself should go to a private individual. It should go to the government because it is protecting the land with its army and building infrastructure to maintain its value.
Is this not what happens, in a distributed way, via property taxes?
Banks make relative profit on rates. Lower rates usually means the relative profit increases. Then, because as rates fall and prices increase, the volume of mortgages increases.
As long as rates fall, banks win.
True
> Lower rates usually means the relative profit increases.
The spread increases? Not necessarily.
> Then, because as rates fall and prices increase, the volume of mortgages increases.
Because housing prices go up in response to lower rates, I am not sure that is the case. You can almost think of the total payment being the same, and adjusting the principle/interest ratio.
I think large exurban tracks are how they try to boost volume.
> As long as rates fall, banks win.
Doesn't follow from the rest. Homeowners---whoever can afford it, typically do well relative non-homeowners who really get screwed over here. Homeownership in general is bad, in that other ways of doing housing would result in better land use and growth, but this is because low density is loose-loose, not because banks make more money that way.
2.49% auto loans are common, and some people can get even better. Mortgages are similarly cheap.
Now, if you know how to do it, there's a big opportunity for you just opened up. You could buy the place (probably for cheap), hire the cooks for $20 or for $50 (they would be ecstatic to work for you, I am sure, you're not that previous greedy owner and would pay them lavishly) and become the model of a businessman. People love good Mexican food. I know I do. I know many people that do. You can't lose, really - it's a mystery why there aren't more Mexican food billionaires... It's so simple, after all.
Somehow most of such attempts I've heard of never turned a profit and shut down soon. Maybe those restaurant owners know something about their business that is not obvious to a random person only reading newspaper headlines...
Not true.
>While Chipotle raised wages from $13 to $15 an hour, or 15.4%, menu prices, on the other hand, were hiked between 3.5% and 4%. Price increases are generally quite small relative to the increase in workers' wages.
>he knows it, and he made the calculation and decided there's no way to pay all his costs, charge the price that people would be willing to pay, and make a profit.
How does he know for certain? He never even tried raising prices.
We were talking about a single shop owner which usually doesn't measure revenues in billions and runs everything out of his own pocket and bank loans usually backed by the same pocket. If you don't understand the difference, maybe giving advice to businesses shouldn't be your primary pastime.
> How does he know for certain? He never even tried raising prices.
Sure, such a thought would never come to his mind without your help. And surely, a business owner would never know a thing about his own business and his own pricing without you instructing him on it with such a sage advice as "just try it!". Maybe tons of people would line up for $50 tacos and only the stupidity of business owners - which, as one, for some reason, choose to ignore your advice to just try it, which would make them billionaires - prevent it from happening. Seriously. How much disdain one must have for people actually living the thing...
I'm not talking about literally $50.00 for a taco. I am talking about business owners who I'd assume know their business a bit better than a rando from the internet. And about the necessity of not thinking everybody but you missed a completely obvious solution like "just raise prices" because they don't understand anything about their business, but you do. It's usually not that simple.
By that meager definition a lot of restaurants don't pay a 'living wage'
It really isn't. Either your wage is enough to allow you to cover the cost of living, or it doesn't.
By definition, any job which depends on supplemental income such as tipping to allow a worker to make ends meet is quite obviously not a living wage.
What frustrates me about economics (with my one intro class level experience) is that they could only talk about equilibrium. The dynamics of things changing like this is what would be really interesting.
In terms of total market, the effects are well studied in the field of labor economics.
Big producers can easily absorb the added labor costs. They outsource some elements of their labor (prep work). They simplify menus for better economies of scale. They cut back hours on marginal employees and add hours for high productivity ones.
Small shops without economies of scale struggle and go out of business. A restaurant owner that owns 1 restaurant is likely working full time to keep it afloat. The added time to respond to the current labor market can break the camels back. vs. McMegacorp that has people that sit around and optimize cost all day long.
So the trade off is more McDonalds and Chipotle and less Albertos burrito stands.
They are basically taking the economy of scale that a large chain previously exclusively had and bringing it to the market to street sales (e.g. mom & pop joints). They simply took what they were doing for institutional food service and expanded it because it's substantially more profitable for them than selling the raw ingredients.
"You could do better if you raised prices a dollar" and "you would do worse if you raised prices a thousand dollars" can absolutely both be true. In fact, in many, many circumstances, they will be.
This blend of slippery slope argument is all fine and dandy, but the key point of this discussion is that there are operational expenses and revenue and if your business plan depends on a never-ending inflow of cheap labor from people willing to work for below-poverty wages to drive down your operational expense then not only is your business model completely unrealistic but you also have to take a step back and seriously considering your net contribution to society.
I mean, think about it: why is a 1000$ pizza supposed to be a ridiculous idea but 8$/hour to make said pizza is not shocking? Is it reasonable to assume that the person making the pizza should be forced to work about 3 hours making pizzas before he could afford one of his own?
A pizza place in the center of a popular city with high ratings probably can up the prices.
Some people around these parts have ardently defended that 100k USD is poverty wage and that having a net worth of 1 million doesn't make you rich.
So I'm inclined to definitely not believe "working class".
You could have a point if you didn't picked an example from an industry where you count on customers to expense additional charges to subsidize employees' wages in the form of tipping.
Perhaps in some cases, but far from always. Down the street from there are 3 'cheap' pizza places within a ~5 minute walk from each other, that all server basically identical quality pizza at essentially the same price. If any one of those where to raise their prices people would almost certainly not pay and just go to one of the other places instead.
There is also a 4th place that serves much higher quality pizza and charges 50-100% more than any of the other places as it is. If they where to raise their price by a buck then people would no doubt still pay since the people who go to that place have already proven themselves less price sensitive.
EDIT:
Not saying its nothing, good money but to call it a lot would be an overstretch imho
heck maybe by then they can just automate away the jobs too
No. What I am saying is that if you are only earning $5,000 per year, you should go out of business, because clearly, that person is a horrible business person. Maybe he is not doing any marketing. Maybe horrible food with substandard ingredients. Maybe he never heard of the maxim "location, location, location." Maybe he never cleans the restaurant and it is a filthy mess and has a filthy bathroom (I've been to restaurants like this, and immediately walk out - if they can't clean the bathroom, what does their kitchen look like?). Maybe he spending extravagantly on stuff that doesn't make a difference. Maybe he has too many employees.
I used to live in San Francisco, which is a real foodie town. People go out to the restaurants all the time - plenty of people, and lots and lots of small restaurants. And there were restaurants opening and closing all the time, and there were restaurants that have been open for 100 years.
The restaurant business is one of the most unforgiving industries that one can get into. But, there is no reason at all to go out of business, unless one needs to go out of business because they are a shitty business person, or if tastes and mores have changed, whatever.
Only chains and large corporations /s
Yet they get treated like evil "fat cats" by a certain section of the intelligentsia. Many of whom simultaneously believe global mega corporations who profit from wars and dictatorships, avoid paying taxes, bust unions, use slave labor, and buy politicians and influence elections are noble justice warriors. It's really strange.
That is why it is strange to you. They don't exist. They're some boogieman that was made up to scare people like you.
A small business can still be exploiting workers with abusive labour and business practices.
If your business model relies on working your employees to death while paying close to nothing then, regardless it's a golden goose or a money pit, then you have no right to complain that you're being held accountable for exploiting and abusing workers. Moreso, you have absolutely no right to complain that the job market rejects your exploitation.
Small business that doesn't make much money, doesn't pay its workers much, and requires a lot of exploitation to keep the doors open.
Now the workers are leaving and those businesses are going bust.
It's capitalism at work, but it hurts if you run a not so profitable pizza joint.
If they have a small mom and pop company that cannot pay workers at least $50,000, then they need to go out of business. Then, as more and more shops go out of business, then there will be less of a supply and then the company can demand more money from customers and pay their workers more. Except, the reality is that the owners WILL make more money, but still won't want to pay their employees more, and will give the same line - that that type of labor is unskilled and f-ck them, which means more money for the owner. That's the reality. And if true that the labor is unskilled and the owner shouldn't pay more, then the workers should not come back to work.
All the Wall Street journals and pro-business journals and business videos have mouth noises that people don't have to accept the wages and it is voluntary work. But, when it actually happens, the cry like a bunch of little babies and say that the worker is at fault for not wanting to work for no insurance, shitty wages, and not being able to afford housing. Well, let the business owners do all of the work without workers, and get all the money. Sounds good to me.
You like your Mexican food, but only want to pay .89 cents for it? Good. You go grow the beans, grow the wheat or corn to make your own tortillas. Buy and milk your own damn cow in order to get the beef and milk the cow to make sour cream, and grow an avocado tree to make your own guacamole.
It's ok. Do it yourself. Let all the cheap restaurants go out of business. Deal with it.
And that the story. That's the REAL story, not the one that you are making up.
However, there might be a solution. If a business shows me all their financials, ALL of them, and the personal financial statements, and if I see that they are not making a lot of money, that's fine, maybe I will work for them. But if I see that they have 10 restaurants and make $750,000 per year, well, f the f out of them. But, business owenrs, show me your financials. You don't want to? Fine. Do it yourself. But I'm not going to work for $18,000 with zero benefits, while you're making $750,000. You say your contributions is worth more? Good. Do it yourself. I, and everyone else, don't accept that wage anymore, so do it yourself and go out of business, and you won't get that $750,000 per year anymore anyways.
This is why there is a push for a global tax.
Anyways, the point is that there are a ton of ways to reduce or eliminate profits. If I was a business owner making $4 million profits, I'd reduce the profits so that each employee made an extra $1,000 to 50 employees for $50,000, they won't be squawking and bitching and are happy, or a little bit better, about the piddling amount.
why? if people choose to work there it's consensual, if they don't then sure but they don't need to. and what's wealth inequality look like when we're left with corporations and chains owning everything? when small mom & pops can't compete or even get off the ground.
I say that employees should not go to work for corporations and chains, either. F them all.
I have some sympathy if the mom and pop if they barely make any money, but there are some mom and pop places out there where the mom and pop own 10 locations, which is not huge, compared to chains. But they are making $1.5 million in income per year, all the while they are making sure that employees don't work more than 30 hours per week so that they don't have to pay benefits, no health insurance, treat them like crap and not dignity. I know that all businesses don't do this, but probably 95% do, even though I have no citations for this. But I rarely read about those companies who do. And don't say many do, but nobody hears about them. No way.
And again, for the person making $5,000 per year, who cares if they go out of business. They are NOT doing it right. It is only logical that they should get a janitorial job, or work in a stock room for $30,000 per year. It's just logical. And, with making $5,000 per year, their restaurant is probably filthy, bathrooms filthy, substandard ingredients, dirty kitchen, sh-tty chairs and tables, indifferent wait staff and cooks. Again, not every single one. But if you're making $5,000, that sure is the way to bet.
Furthermore, if there are only companies like Amazon making all the sales, then that is a monopoly, and it should be broken up. Monopolies are the bad part of capitalism, and is why the government should break them up. That is what they did with AT&T in the 1980s and telecommunications really took off after that.
You are using a straw man argument.
Or alternatively, fine, do it that way, but look at the owners' financials and wealth (not just income). If they are making $1.5 million per year, then lower that to $100,000 per year and get gold health insurance for employees, have employees work 40 hours per week instead of jaded sh-tty owners only scheduling less than 30 hours so they don't have to pay benefits and employees have to work 2 jobs, have them not treat employees like sh-t. That also works for me.
In 1965, CEOs made 20 times (2,00% more) the lowest paid worker. Now it is 300 times (30,000% more) than the lowest paid worker.
For most of the 20th century, the tax rate for the wealthiest was 70% to 90%. And this was NOT only during the war years. It was around there from 1918 to 1985, when the top rate was lowered to around 35% and stayed there since. That is about the exact time that the rich got richer, and everyone else stayed about the same, or went down, due to inflation.
And if you say that the owner took all the risk to start the business, fine, cool. Let them do all of the work without employees. I'm good with that.
What you say is yet one more specious argument to pay employees less so that owners can buy more yachts and bigger houses. But fine. Do all the work in 10 locations, all by yourself. Good. And good bye.
wow, this site really does skew toward coastal cities in the US doesn't it? $50k a year is a high end white collar salary enough to buy a (often significantly) better than median home on a single salary and enough to be considered in the upper 25% income for most of the places I have lived.
I think one of the biggest problems in politics in the US is that we have such a diversity of experience and needs in this country and most politicians (and perhaps voters) think that the solutions that are best for their local area are actually good for the whole country - when in most cases the experience across millions of people and thousands of miles from rural to dense urban is so different that almost no nation wide solution is very good.
Sure, not everyone lives in a major city. It doesn't make a lot of sense for a line cook to make $50k in Victoria or Amarillo. But in these places, they are not being paid the ~25-30k which could be equivalent to about $50k in the city (which still isn't enough to buy a house). They are being paid $7.25 an hour and the tips aren't so good.
You totally miss the parents point, which is that most restaurant workers are barely paid enough to rent and eat, to make the point that the US has a diversity of CoL.
First thing: let me ask you this...are you a business owner and have a vested interest in keeping wages down? Or maybe your parents or friends are business owners and you sympathize with them?
This is not about whether it is a coastal or rural issue. It is about a fairness issue.
No matter what city, rural or urban, if a business owner owns 10 locations and is making $1.5 million per year, let's just say for example, and he or she is paying $7.25 per hour for a total of $14,500 per year, and with zero health insurance, only offering 30 hours per week in order not to provide benefits that they do have for full time employees, and treat employees like sh-t, F them. I don't care if $14 is a lot in a rural area. That's not the point. I know you want it to be the only point to argue, because maybe it in your best interest to argue only that point.
However, even if it is only politically/philosophically your point, like maybe you are a libertarian or something, your viewpoint is probably that employers are free to offer any wage, and employees are free to accept it or not. Well, what is happening, is that employees are not accepting in droves. And this is causing business owners to say, "No, we don't mean free offer and acceptance, what we means is we say that in order for us to not seem like the total c-nts that we are, but now that people are taking us up on that and not accepting our offers, we want to cry like the whiny b-tches that we are and complain about how people that should be working for us, are not, and now we can't make $1.5 million while paying them $14,500 per year." That's what this is really about.
And there are a lot of other false arguments. That "the owner took the risk and is entitled to the reward." Fine. Ok. Great. Do the whole thing yourself then. Perfectly fine. Go to it dude, or dudette. Knock yourself out.
Or, sometimes people say that the money is "all on paper", another shitty argument. Jeff Bezos only takes an $80K salary, and is taxed only on that. Most of his wealth is "all on paper." So, you (not you you, but those who say it is paper wealth, I don't know if you do) are telling me, seriously, that if Bezos goes into a bank, and the banker knows it is Bezos, and Bezos applies for a loan to buy a $10 million home, that the banker says, "No, you only have a salary of $80,000." That is because the "paper wealth" is actually collateral, as are all the equipment, inventory, real estate, etc. Same as any business owner.
Another fallacy is "the business owner can't re-invest if they pay out larger salaries and provide more jobs." Yeah, right. With their multi-million homes, and vacations to Gstaad, Switzerland and safaris to Africa. I haven't seen Jeff Bezos do one god damn thing with his $200 billion, except keep trying to drive his employees wages down and trying to keep them from unionizing. Yet, HE doesn't want to keep HIS salary down, and recently bought a $150 million home in Los Angeles.
And, yet another fallacy, "business owners pay 80% of taxes." Who give a fluck? They should pay a lot more. You think this is ridiculous and communist? You have been brainwashed by the all-pervasive media. If one is into MAGA - Make America Great Again - or a libertarian, or whatever, you have to realize that if you turn back the clock, for most of the 20th century, tax rates on the wealthiest in the highest tax bracket was from 70% - 90%. It changed in 1986, when Ronald Reagan got it reduced to about 35%. And that is about the exact time that the rich started getting richer and poor started getting poorer.
In 1965, CEOs in the US earned 20 times more than the average worker but by 2015 it had risen to 300 times.
The iss...
How did the owner get 10 restaurants? They likely started with one and carefully scaled up over time as they could afford to, each time taking on risk that they fail and wind up with less than what they started despite all the effort. The business exists to benefit them, not to provide a place for people to work, that's a consequence. One reason employees make less than owners because there's less risk involved. They show up and do a job in exchange for money. Most employees have no equity in the business.
If you want to become a big shot owner making hundreds of thousands then you need to do it yourself and put your capital at risk, become a partner, or get a loan. There's no guarantee it will pay off but there's incentive to, which is why people do it. If there's no incentive or it's not great enough and the risk won't be taken. That means less people opening or expanding businesses, which leads to less opportunity for workers as there are less demand for their labor, and less wealth for society as there is less stuff to spend money on.
If you're not comfortable with the risk of being an entrepreneur and someone is willing to pay more for the same labor you're well within your rights to work for someone else.
I don't know what point you tried to make, but it's completely irrelevant if the business owner scaled things very carefully, blew all his YouTube money on restaurants all at once, or inherited his family business. How the business came to be is totally irrelevant.
The only relevant point is how employees are treated, and if it is fair or not. If not, and this is the key point, why should anyone continue working for a business that abuses and exploits them?
Are they paid fairly or a slave wage? Can employees live on their paycheck or do they need food stamps to get by? And are employees expected to endure hardship just to finance their bosses' careful or reckless expansion strategy?
What we're seeing is people answering those questions with a resounding "no". There are far better things in life than work yourself to death to feed a "very carefully scaled business" that earns the owner a small fortune.
People exist for reasons other than validate someone else's business model, and there is more to life than working shifts for peanuts at a "carefully scaled business".
Your restaurant doesn't have a right to be in business and I am not obligated to work for you.
>
> a) be willing to drive your business into the ground serving a limited menu because you won't hire a couple cooks at $20 an hour, or
>
> b) have a business so close to the brink of shutting down that an additional $20-50 an hour will shutter you.
Restaurants run on notoriously thin margins ( https://upserve.com/restaurant-insider/profit-margins/ ). There's a reason restaurants often fail even in good economic times: even small miscalculations or mistakes can put a good restaurant out of business.
Everyone cooking is a massive inefficiency, and yet paying for conventional restaurants is also uneconomical. Eating shelf-stable food is cheaper than cooking for most people, but only until the bad health effects catch up. Just like global warming, the market can only optimize over small time horizons without politically pricing in externalities.
1. options: I need to be able to serve two or three meal options tops depending on what is available / inexpensive. People really like having options but that drives costs up which will drive me up a wall.
2. audience: I need a captive audience such as prisoners in a prison or resident college students who pay for the whole semester at a cafeteria.
1) I personally hate choosing things from menus as as I truly like all the food "that isn't bad" (for all dishes there exists a pareto equal or better dish which I like. Something like that?) That fact that a single dish du jour can get more attention an planning re seasonal ingredients and other inputs due diligence is a huge plus too.
2) I am also fine committing to eating at the same restaurant once, twice, maybe even 3 times a week, and do that anyways.
Count me in!
Why not instead mandate compostable containers?
I think the issue is less intractable that it might sound. Food delivery could pick up last meal's dishes. Or offices could have dishwashers.
That trash is so cheap, and sources of trash so unregulated (because just raising the cost of trash leads to litter --- need to impose cost on the producer not consumer) got us in this rut. The inconvenience you speak of is more effect than cause.
My parents tried a buffet thing once, didn't work. You need a certain amount of scale that wasn't present in their area. I have seen some proper huge buffet places though, seems pretty good though rent is an issue.
If that is buffet-style and a hefty land value tax to stop landlords from milking the restaurant, so be it.
Aside from buffet-style, casual, fast-casual, fast-food, and street food outlets fit in the “prepared food without, or without as much of, the frivolity that simulates aristocracy”. It’s not exactly an underserved space.
If I spend an hour and a half prepping and cooking dinner, but I managed to buy that ingredients for $10 less than what I would spend at a restaurant, it's still cheaper to eat at the restaurant if I factor in the time I spent.
Just an addendum: if that time would have been spent, say, watching TV (and you are a healthy adult that doesn't have any psychological or physiological benefit from watching TV) then the time cost is possibly negligible.
Full time salaried workers can't easily convert additional time into money.
I think we do see PP's point with poorer people with horrendous commutes, part time inconsistent jobs, etc. Lot's of anguish about "food deserts" of course, but I think there is a larger reckoning that we simply need to reduce work and commutes before dual income people at all levels can afford to cook real food.
And that’s not considering people willing to lose money so they can own a coffee shop!
My point is only that restaurants are famous for having tight budgets. It’s no surprise when restaurant owners say they can’t absorb even small cost increases.
Raising the prices would not work. If it did, some of them would have already done it.
All the bills get paid (including wages), then you get what's left over. If you had a good week, then you get a nice stack of Benjamins. If you had a bad week; maybe not so much. In fact, you may even need to chip in, to keep the lights on.
I have seen, many, many SMB owners start living "high on the hog," as soon as they start doing well. They buy a 5-bedroom house in a marqée neighborhood, a C-class Merc., LV bags, etc. I know, for a fact, that most of them make far less than I ever did. Frequently, they get the company to pay for a lot of it (put one bullet in the chamber, and give it a spin).
They have gotten used to living large, and it's damn difficult to downsize, after that.
So that means they need to do everything they can, to make sure the last pile is as big as possible; regardless of how the corporation is performing.
If they banked on hiring undocumented workers, or skilled artisans at rock-bottom prices, and that pool dries up, they are left with the choice of leasing a Subaru, and selling the Jag, or trying to make whoever has been loyal enough to stick around, fill in the gaps.
Or it’s to get paid for bearing all of the risk of starting and running the business, and being financially on the hook for when it fails and gets to deal with years of being sued.
All those big CEOs getting caught on the hook.
The CEO is someone that is hired by the owners, to run the company.
They may make good money, but they are paid peanuts, compared to the real owners (stockholders).
I am a big believer in having a "rainy day fund," but that doesn't happen, when Louis Vuitton comes out with a new $20K handbag...
A business owner is the last one on the payroll, so they get the extra, if things go well, but they also assume pretty substantial risk. If things go badly, the buck stops at their front door; possibly on an eviction notice.
I have also watched many of these same SMB owners, hit the skids, and they fall hard. Many wreck their credit for decades, destroy any retirement savings, and, worst of all, suffer terrible self-respect damage.
I'm not being snarky, there. That demolished self-confidence can be bad. I have known folks that have become suicidal, after losing a business.
Makes being smug, kinda hard. They may have been jerks, when they were doing well, but it's quite sobering, to see what happens, when things go pear-shaped. Doubly so, if they have a family.
I don't see small business owners as morally superior to workers. We're all just humans.
(And yes, starting a small business where you are able to leverage a bunch of other people's labor is still the most reliable way to become a millionaire in the US.... well, besides buying a decent house a few decades ago in California and becoming a NIMBY.)
It may well be that the market for food places in your area cannot support the current set of outlets, and some of them will have to die, and this is how they die.
The way I think about it is there's a metastability in the economy that's not often discussed. Basically, unviable business models can survive small disturbances. One chef gets fed up, no problem. One customer think it's too expensive for what he gets, no problem. When there's a big shakeup, it all comes crashing down.
The average small restaurant owner makes ~$50K per year and has very little line of credit. So unfortunately it's a zero-sum game.
Increasing cooks to $20hr means reducing their own comp to $20hr.
A cultural shift may mean that people collectively decided that they will, for example, spend 8% of their income on eating out rather than 12%. That represents an aggregate decrease in demand and would indicate a negative sum game (something most of HN seems incapable of comprehending)
No, it represents a positive sum game because the job being offered is unsustainable and therefore should be replaced by a more sustainable job.
The equity is almost always in the real estate. McDonalds basically just keeps the cash flowing while the land increases in value.
Small restaurant owners are more likely to rent.
Let's say he pays his cooks 30$ more. How long are they open, how many people work in the kitchen? Two people, 12 hours? So that would be 720$ more per day.
How much do they earn per meal? In my country in most restaurants charge around 10$ for a meal. Even assuming no costs for the food resources, that would mean 72 more meals to sell, per day.
To me that sounds like quite a challenge.
Maybe the owner would be better off with unemployment!
In the case of the restaurant, what they are able to charge for their product is governed by myriad variables, some of which are: location, competitive landscape (how many, distance, kind, etc.), audience dynamics (breakfast and lunch crowd or spread across the day and evening), etc.
Competition drives both prices and margins down. Once an area has reached price stability, it is very hard to raise prices. So, you are selling a burger for $10 and, if you are lucky, you make $2 to $3 on it. Depending on the nature of the organization, delivering burgers might require 5 to 10 people.
Along come politicians pandering for votes and push for a 50% increase in minimum wage.
This increase causes a chain reaction through the entire wage structure. The guy making $10/hr now makes $15. Someone making $15 makes $20, and so on.
Most people don’t stop to do a bit of math and understand reality before accusing business people of being evil, greedy, or both.
What ends up happening is that the thin margins and realities of the market can’t support the delta in cost structure. The business either controls costs or shuts down.
How do you control costs?
Less people doing more or less people and automation. A few more options, but that’s the basic idea.
In other words, the politicians get the votes and continue on their sweet power ride. Those who voted for them lose their jobs. A bunch of the businesses who created jobs shutter. Fantastic deal, isn’t it?
I am in the process of setting-up a manufacturing operation to produce up to 100K of our products per month. We want to manufacture in the US. The ONLY WAY this is even remotely possible is through automation. We are explicitly designing both the product and the manufacturing process for as close as we can get to lights-out manufacturing. We cannot afford hordes of people at $15/hr. The only alternative is to go to China, Taiwan, Mexico or other shores. That’s the reality we have created for ourselves through what I can only describe as ignorant voting decisions that only benefit politicians.
Everything we use in manufacturing comes from China. We can either understand this reality and think of creative way not to lose even more job-generating industries or we can continue to be led by the nose by politicians with no skin in the game and one day wake up and think “What happened?” without realizing we did it to ourselves.
I don’t understand how all these unemployed people are surviving.
Many, many workers are working for non-economic reasons. Retired people work for exercise and social interactions. Married couples who can get by on one income no longer need to have both spouses working. And forcing students into attending classes from home has further forced more and more working couples to take a break to supervise their kids who are learning at home since most children (particularly young children) cannot be trusted to attend their classes without direct supervision. Many teenagers, also, who would have been in the workforce to have some spending money have decided the risks of the pandemic aren't worth it. And then there's the unemployment benefits. In short: Many people who can get by without working suddenly are.
It only takes a few percent of the population choosing to no longer work to create a massive labor shortage.
And now if they do want to move back, rent prices have in many places doubled, so now they are demanding even higher wages to make up for it.
If the US can spend billions on fossil subsidies and trillions on military and foreign wars, it should be a no brainer to stimulate domestic the economy with universal healthcare.
The numbers you're looking at are too small. The war on terror cost $8 trillion in 20 years.[0] That's $500 billion a year. Divide this by US population (330M) and you get $1,515. How much healthcare could you buy for that per year?
And don't forget that even without the wars a lot of this money would've been spent on modernizing the military anyway.
[0] https://www.brown.edu/news/2021-09-01/costsofwar
We have plenty of resources but not the will to direct them.
https://posey.house.gov/wasteful-spending
So maintaining a moral order means punishing the unworthy. This means poor people, who are assumed to be slothful, and immigrants and brown people for other reasons. They are willing to pay money to make sure that the people they have contempt for, suffer. Once you understand this all sorts of things start to make sense.
USA's system is perversion in all possible ways.
The main advantage of public heathcare is that being single-payer it can use its monopolistic buyer power to push prices down. It leads to lower overall costs, but also to underinvestments and lower wages in healthcare.
So much of our current drama would be mooted by sharing those record corporate profits with labor, by dialing back executive compensation, by returning to dividends vs buybacks (closing some more tax dodging schemes).
--
Curious to see if Labor, agriculture, small businesses, and credit unions in the USA return to their roots: Cooperatives and collectivism.
A lot of progress in governance these last 60 years. Innovations like worker-directed social enterprises and class-B corporations. New orgs using modern bylaws could be far more resilient to vulture capitalists.
There's SO MUCH work that needs doing, needs begging to be fulfilled. And yet. Wall St and SPACs can't seem to figure out how to capitalize anything smaller than a unicorn.
Co-op start-ups have a surprisingly low rate of failure, relative to traditional corporate structures.
The wealth trickle up has changed into a torrent since covid, something is going to break.
Rents did go up as a result of general inflation and the eviction moratorium, but that is not the same as rent-seeking.
I think that unemployment benefits ends today. The eviction moratorium ends in Oct.
So we will see… if they still cannot hire they will try to increase wages + increase prices.
A simple example: suppose you are an old person who has trouble keeping their apartment clean as of late. Say you could offer somebody else 5$ to clean your room, because your pension is so low.
By the standards of modern activists, you have now become an evil exploiter of wage slaves.
In reality, you have created a new job. If nobody needs it, fine. If somebody needs it, great.
In any case, here we have an article whining about unfair employers. Are there really that many articles whining about lazy workers?
This is wrong. A Presidential candidate going on a crusade against "welfare queens" changed LOT in the US.
80%-90% employee turnover is built into the business model.
It's never a "just do this" answer. Never. You don't tell your friend with depression to plow through this down phase he's in. And the other friend with Crohn's disease and a colostomy bag doesn't benefit from someone suggesting she try a gluten-free diet.
It's the same in the food industry. The issues at hand are complex, the ripple effects of any change are significant and multifaceted, and the foremost issue today may be superseded tomorrow while nonetheless remaining an area for concern and attention.
The better move from the outside is to provide the support that's needed today by the business (or the friend) and within your means. Can't afford to go out for food regularly? I get it, just like your job may not allow you to be available as often as your friend with Crohn's disease needs a ride home from the hospital after some procedure.
The examples they give are insane. People were paid $15/hr to not work, so of course they were demanding $20/hr to work.
This program was the most bipartisan predictably bad program ever created, and almost certainly created more economic damage than the disease.